Habib v. Raytheon Co., 79-1147

• Decision Date: 25 February 1980
• Docket Number: No. 79-1147,79-1147
• Citation: 616 F.2d 1204,199 U.S.App.D.C. 11
• Parties: Mohamed HABIB and Middle East Services, Appellants, v. RAYTHEON COMPANY and Raytheon Services Company, Appellees.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1204

616 F.2d 1204

199 U.S.App.D.C. 11

Mohamed HABIB and Middle East Services, Appellants, v. RAYTHEON COMPANY and Raytheon Services Company, Appellees.

No. 79-1147.

United States Court of Appeals, District of Columbia Circuit.

Argued Oct. 29, 1979.

Decided Jan. 21, 1980.

Rehearing Denied Feb. 25, 1980.

Appeal from the United States District Court for the District of Columbia (D.C.Civil No. 78-0286).

Judah Best, Washington, D.C., with whom Roslyn A. Mazer, Washington, D.C., was on the brief, for appellees.

Jack A. Blum, Washington, D.C., with whom Ronald L. Plesser, Washington, D.C., was on the brief, for appellants.

Before LUMBARD, ^* Senior Circuit Judge for the Second Circuit, and TAMM and MIKVA, Circuit Judges.

Opinion for the court filed by Senior Circuit Judge LUMBARD.

LUMBARD, Senior Circuit Judge:

Appellants Mohamed Habib and Middle East Services ("MES") (hereafter collectively "Habib") appeal from an order entered December 1, 1978 by Judge Oliver Gasch of the District Court for the District of Columbia granting summary judgment on statute of limitations grounds to defendant Raytheon Company and Raytheon Services Company ("Rayserve") on Habib's claims for breach of contract, tortious interference with contractual relationships, and conspiracy to defraud. We affirm Judge Gasch's decision in part, but reverse and remand other parts of this case on the grounds that the applicable statute of limitations does not bar Habib's action because of the severable nature of the agreement in question, and that, as to his claims respecting the severable portion, Habib has raised genuine issues of material fact.

Habib is an American citizen who resides in the District of Columbia and MES is a division of Mundus Corporation, a District of Columbia corporation with its principal place of business in the District of Columbia, and wholly owned by Habib. Raytheon, along with its wholly owned subsidiary Rayserve, is a Delaware corporation with its principal place of business in Massachusetts. Raytheon and Rayserve are engaged in the manufacture and sale of technologically advanced weapons, including the Hawk Missile System, which Raytheon hoped to sell to the government of Saudi Arabia.

In 1971, the Saudi royal family, according to Habib's allegations in the record, decided to channel the country's arms purchases through one of its members, Prince Abdallah (who did business under the name "Arabian Establishment for Trade, Shipping and Air Navigation"). Abdallah then contacted Habib, whom he told to inform Raytheon that henceforth Raytheon should deal with Habib as agent for Abdallah on sales such as the Hawk Missile System. On March 4, 1971, Abdallah (through Arabian Establishment) entered into a contract with Habib and MES providing for Habib and MES to receive up to 20% of any commissions earned by Abdallah under Saudi Arabian sales contracts.

On May 14, 1971, Rayserve signed a contract with Abdallah, described as a Representative Agent Agreement (the "Abdallah contract"). Under this contract, Abdallah became Rayserve's sales agent in Saudi Arabia for certain Raytheon products including the Hawk Missile System. Abdallah was entitled to receive 6% of the gross selling price of these items as commissions from Rayserve. This contract contained a clause recognizing the "existence and participation" of MES, and recited that an agreement between MES and Rayserve "is attached and hereby made a part of this Agreement." Paragraph 20 of the Abdallah contract stated that Rayserve would pay to MES 20% of the money due Abdallah under the contract.

The Abdallah contract was executed in Saudi Arabia but contained a choice of law clause providing that "any claim or controversy relating to this Agreement, its interpretation, performance, and validity shall be construed and adjusted in accordance" with the laws of Massachusetts. By its terms the Abdallah contract was to last through June 30, 1976, but after June 30, 1973 it was terminable on four months notice.

On May 17, 1971, three days after the Abdallah contract was signed, Rayserve, MES and Habib entered into a contract (the "Habib contract") under which Habib agreed to "identify" and "qualify" a "Saudi Sponsor/Agent", to provide "miscellaneous inputs and support" for Raytheon's Saudi Arabian activities, and to give Raytheon "advice and direction." Habib was to receive $25,000 a year in monthly installments for the duration of the Abdallah contract, and 20% of any payments earned by Abdallah, whenever any such payments were made to Abdallah under his agreement with Rayserve. Under the Abdallah contract Rayserve was not obligated to pay any commissions to Abdallah until Raytheon delivered and received payment for the goods sold. Under the Habib contract, Habib was not entitled to receive his share of Abdallah's commissions until Abdallah was paid.

Rayserve made monthly payments towards the $25,000 per year consultancy fee due under the Habib contract from May of 1971 until December, 1971, by which time Habib had received $16,666.04. On October 28, 1971, Abdallah had written to Rayserve, in Arabic, a letter which contained the phrase (in the unofficial translation used by the district court), "I am forced to refuse representing you." In a letter dated February 18, 1972, Rayserve told Robert Clark, who headed a company affiliated, at the time, with Middle East Services, that it would have to accept Abdallah's decision and that "(t)his, of course, affects the agreement with Mohamed (Habib) and Middle East Services since it was completely contingent upon the Prince's agreement."

At about this time the chief executive officers of Raytheon visited Saudi Arabia and met with Abdallah. On February 23, 1972, a Rayserve Vice-President, C. O. Iselin, wrote to Abdallah on his return to the United States confirming the "concellation" (sic) of Rayserve's agreements with the Prince, and saying that "(w)e shall continue to call on Your Highness through our common friend and in the manner in which you have directed us."

Habib, through his attorney, thereafter made several attempts to secure payments he believed were due him under the Habib contract. ¹

In April, 1973, the Saudi government agreed to purchase a Hawk Missile System from Raytheon.

In late 1977, the Securities and Exchange Commission began an investigation into the legality of payments made abroad by Raytheon. ²

On February 18, 1978, plaintiffs filed this lawsuit in the District of Columbia, invoking federal jurisdiction on grounds of diversity.

Judge Gasch granted summary judgment to defendants on the basis of the three year statute of limitations applicable to contract suits in the District of Columbia under D.C.Code 12-301. He viewed Rayserve's action in ceasing to make monthly payments in January, 1972, as accruing in Habib's favor a right to sue for breach of contract. Judge Gasch reasoned that District of Columbia law controlled the limitations question because first, under Klaxon v. Stentor Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), a federal court sitting in diversity must apply the conflicts rule of the forum and in the District of Columbia it is well-established that "the statute of limitations of the forum must be automatically applied . . .". Manatee Cablevision Corp. v. Pierson, 433 F.Supp. 571 (D.C.D.C.1977). Second, he rejected Habib's argument that the Massachusetts choice of law clause in the Abdallah contract should be imported into the Habib contract, which contains no such clause. The Massachusetts statute prescribes a six year limitations period in contract actions. As reasons against reading the two contracts together Judge Gasch relied on the fact that Habib was not a party to the Abdallah contract and that there was no danger, in the case of the Habib contract, that the contract would be governed by the unfamiliar law of Saudi Arabia ³ since the Habib contract, unlike the Abdallah contract, was executed in the United States by American citizens. Judge Gasch ruled that the only parts of the two contracts that had to be read together were the provisions relating to the sharing of commissions between Habib and Abdallah. Third, Judge Gasch held that even if Massachusetts law applied to the action, a court would have to look not only to Massachusetts' statute of limitations but also its borrowing statute, Mass.Gen.Laws Ann. ch. 260, § 9, which would direct the court back to the District of Columbia limitations period.

The District of Columbia statute of limitations applied by Judge Gasch, D.C.Code 12-301(7), sets a three year limit on contract actions. Judge Gasch ruled that the statutory period began to run on the breach of contract claim from the time the agreement with Habib was "terminated" by Rayserve in January, 1972, when payments stopped, or at the latest on February 18, 1972, when Rayserve informed MES that it regarded their contractual relationship as at the end. On Habib's tortious interference claim, governed by the three year statute of limitations provided by D.C.Code 12-301(8), Judge Gasch ruled that the statute began to run from the time injury resulted from the harmful acts when Rayserve stopped making payments under the contract in January, 1972. As for plaintiffs' civil conspiracy claim, also governed by the three-year limit provided by D.C.Code 12-301(8), Judge Gasch held that an overt act causing damage starts the statutory period for the substantive underlying offense running, and that this occurred when the contract was terminated in January or February, 1972.

This case comes to us on appeal from a grant of summary judgment. Therefore we must determine if appellants failed to raise any "genuine issue as to any material fact", looking at the facts in the record in the light most favorable to the party opposing summary judgment. Recent cases in this Circuit indicate that we must be satisfied that the moving party has clearly established the...