Hester Intern. Corp. v. Federal Republic of Nigeria

• Decision Date: 09 August 1989
• Docket Number: 88-4219,Nos. 88-4178,s. 88-4178
• Citation: 879 F.2d 170
• Parties: HESTER INTERNATIONAL CORP., Plaintiff-Appellee, v. The FEDERAL REPUBLIC OF NIGERIA, et al., Defendants-Appellees, v. Jack M. KOONCE, Individually and d/b/a Koonce Engineering Service, Movant-Appellant. HESTER INTERNATIONAL CORP., Plaintiff-Appellant, v. The FEDERAL REPUBLIC OF NIGERIA, National Grains Production Co., Limited, A Company Incorporated in Nigeria, and the Government of Cross River State of Nigeria, Defendants-Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 170

879 F.2d 170

14 Fed.R.Serv.3d 1074

HESTER INTERNATIONAL CORP., Plaintiff-Appellee, v. The FEDERAL REPUBLIC OF NIGERIA, et al., Defendants-Appellees, v. Jack M. KOONCE, Individually and d/b/a Koonce Engineering

Service, Movant-Appellant.

HESTER INTERNATIONAL CORP., Plaintiff-Appellant, v. The FEDERAL REPUBLIC OF NIGERIA, National Grains Production

Co., Limited, A Company Incorporated in Nigeria,

and the Government of Cross River State

of Nigeria, Defendants-Appellees.

Nos. 88-4178, 88-4219.

United States Court of Appeals Fifth Circuit.

Aug. 9, 1989.

Allain F. Hardin, A. Remy Fransen, Wiedemann & Fransen, New Orleans, for Koonce.

Thomas W. Prewitt, Richard C. Bradley, III, Prewitt & Bradley, Jackson, Miss., for Hester Intern. Corp.

Walker W. Jones, III, E. Clifton Hodge, Jr., Phelps, Dunbar, Marks, Clavarie & Sims, for Federal Republic of Nigeria, et al.

Appeals from the United States District Court for the Northern District of Mississippi.

Before REAVLEY, WILLIAMS and JONES, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

Hester International Corporation (HIC) appeals the district court's order granting the Federal Republic of Nigeria relief from a previous judgment and the court's subsequent dismissal of HIC's claim against Nigeria for lack of subject matter jurisdiction. Jack M. Koonce appeals the district court's denial of his motion for intervention in the case between HIC and Nigeria. We affirm the judgment of the district court.

I. Facts and Prior Proceedings

HIC brought this breach of contract suit pursuant to the Foreign Sovereign Immunities Act (FSIA), 28 U.S.C. Secs. 1602-1611, in state court in Mississippi against the Federal Republic of Nigeria (Nigeria), the National Grains Production Company, Limited, of Nigeria (NGPC), and the Government of the Cross River State of Nigeria (Cross River). NGPC is a corporation created under the Nigerian Companies Act of 1968 by the Government of Nigeria to support the development of agricultural projects in Nigeria. Cross River is one of the nineteen states which make up the Federal Republic of Nigeria. HIC is a Mississippi Corporation.

On April 9, 1981, HIC executed an agreement ("the Agreement") with Cross River and NGPC to establish a rice farming operation in Nigeria. The vehicle for this project was a limited liability company, Bansara Rice Farms, Ltd. Nigeria was not a party to the Agreement. NGPC and Cross River each owned 30% of the interest in Bansara and HIC owned 40%. The project failed, and HIC was removed as technical partner by the Board of Directors of Bansara in January, 1983.

HIC contends that the project foundered because of a lack of adequate capital to cover off-shore costs. Under the Agreement NGPC was to

procure the necessary finance for on-shore costs of the project in the size, sum, and style to be prescribed by the Board of Directors, provided always that the Government of the Federal Republic of Nigeria shall provide adequate security in the form of a guarantee for any such sum of money.

HIC "in association with Bajo Sosanya of Rice Exporters and Producers Limited (REP)" was designated the technical partner to the Agreement (Sosanya was later dismissed by HIC). The technical partners' duties included procuring external finance to cover the off-shore cost of the project (in the size, sum and style to prescribed by the Board of Directors) provided always that the Government of the Federal Republic of Nigeria shall provide an adequate security in the form of a guarantee for any such sum of money or cost of equipment made available by the Technical Partners.

John Hester, President of HIC, states that he arranged for a loan of $50,000,000 through a Swiss financier and merely needed a letter of intent from the Nigerian government in order to obtain the financing. He alleges that Nigeria breached its duty, however, by failing to provide him with such a letter, thus crippling his efforts to obtain external financing and leading to the dissolution of what was a viable project. ¹ Although the Nigerian government was not a party to the Agreement, HIC claims that NGPC was an alter ego or agent of the Nigerian government and hence that Nigeria was bound by the provisions which stated that it would provide "an adequate security" for external financing.

The case was removed to federal court on diversity grounds. The defendants' attorney, Michael Shepherd, shortly thereafter moved to withdraw. Shepherd attended the pretrial conference held on February 12, 1986, and was allowed to withdraw after the conference. The defendants were sent notice of the exact date of the trial setting on March 25, 1986--a full week prior to trial. After receiving that notice, the defendants reemployed Shepherd. The bench trial was held on April 2, 1986. The district court rendered a judgment against defendants Nigeria, NGPC, and Cross River on June 4, 1986, awarding HIC the sum of $206,608,000.00.

The defendants then moved for relief from judgment pursuant to Fed.R.Civ.P. 60(b)(1) and (6). That motion was granted on July 24, 1986, and a second trial was held in June of 1987. The court issued its decision in a memorandum opinion on February 22, 1988. The court dismissed the claim against Nigeria for lack of subject matter jurisdiction, dismissed the claim against Cross River and one claim against NGPC for failure to state a claim upon which relief could be granted, and decided HIC's other claim against NGPC on the merits in favor of NGPC. Hester International Corporation v. Federal Republic of Nigeria, 681 F.Supp. 371 (N.D.Miss.1988). The sole issues on appeal relate to HIC's claim of liability against Nigeria. HIC appeals the district court's decision to grant Nigeria relief from judgment which led to the second trial and also its decision to dismiss Nigeria for lack of subject matter jurisdiction. The decisions in favor of Cross River and NGPC are not appealed.

Koonce, an engineering consultant who worked with HIC on Bansara, claims he was assigned HIC's rights against the defendants by Hester. Asserting that those alleged rights were not adequately protected, he moved to intervene on February 12, 1988, (over six months after the second trial was held) and the district court denied his petition. He appeals the denial of his motion.

II. Nigeria's Motion for Relief From Judgment

We first address the procedural question of whether the district court was correct in granting Nigeria relief from the previous judgment. Within two weeks of the announcement of final judgment, Nigeria moved for relief from judgment pursuant to Rules 60(b)(1) and (6), Fed.R.Civ.P. The district court granted the motion, and a second trial on the merits subsequently took place. ²

Motions under Rule 60(b) are directed to the sound discretion of the district court, and are reviewed only for an abuse of that discretion. Fackelman v. Bell, 564 F.2d 734, 736 (5th Cir.1977). The district court when considering the 60(b) motion recognized that the defendants were uncooperative throughout the entire first phase of this litigation but nevertheless granted relief.

In support of their motion for relief from the final judgment the defendants assert that they were not afforded adequate notice of the trial setting of April 2, 1986, inasmuch as they received notice of the trial date from the plaintiff on April 1, 1986. However, a full review of the relevant facts in this case reveals that from the date of the commencement of this litigation the defendants were uncooperative with regard to every aspect of the pretrial proceedings. It is also apparent that the defendants were, or should have been, immediately aware of the fact that their counsel of record, Michael Shepherd, had withdrawn several days after the date of the pretrial conference in this case and thus at that point had a heightened duty to follow the proceedings and otherwise act to protect their rights in this cause. Furthermore, the defendants had been warned several times that the trial was approaching and that plaintiffs would ask for an immediate trial setting, yet the defendants, apparently content with their pro se status, did nothing. Finally, and most importantly, the defendants were sent notice of the exact date of the trial setting on March 25, 1986--a full week prior to trial.

Despite the foregoing, the court finds that, upon application of the factors delineated in Seven Elves, which serve to guide a court's consideration of a motion under Rule 60(b), the defendant's motion for relief from judgment is well taken and should be granted.

Hester International Corp. v. Federal Republic of Nigeria, Et Al, No. WC85-49-NB-D, p. 2-3 (N.D.Miss. July 24, 1986) (memorandum opinion).

The district court's decision enumerates the defendants' failings but not the reasons for granting relief from judgment, beyond stating that it was applying the Seven Elves' standard. In an effort to demonstrate some of the factors which may have influenced the district court in granting the motion, Nigeria moved to make the transcript of the hearing on the motion for relief part of the record. That motion was carried with the case, and we now grant it.

Upon examination of the testimony, it becomes apparent that the defendants' difficulties in presenting their case at the first trial were not wholly due to obstreperousness, or perhaps an innate feeling of sovereign immunity. There were some differences between Nigeria and its lawyer, Shepherd, regarding payment, and after the pretrial hearing he was allowed to withdraw. This event was not necessarily the result of ill intentions on Nigeria's part. There were considerable administrative difficulties in getting approval for the attorney's payments and communication difficulties between the consulate and Nigeria proper.

Nigeria failed to pay attention to when the trial would actually occur. While notice of the trial setting was sent a week in advance, it arrived on Good Friday, a Nigerian...