Hunt v. Coastal States Gas Producing Co.

• Decision Date: 13 June 1979
• Docket Number: No. B-7984,B-7984
• Citation: 583 S.W.2d 322
• Parties: Nelson Bunker HUNT et al., Petitioners, v. COASTAL STATES GAS PRODUCING COMPANY, Respondent.
• Court: Texas Supreme Court

Page 322

583 S.W.2d 322

Nelson Bunker HUNT et al., Petitioners, v. COASTAL STATES GAS PRODUCING COMPANY, Respondent.

No. B-7984.

Supreme Court of Texas.

June 13, 1979.

Rehearing Denied July 18, 1979.

Shank, Irwin, Conant, Williamson & Grevelle, A. B. Conant, Jr., Cecil W. Casterline and Drew R. Heard, Dallas, for petitioners.

Fulbright & Jaworski, Dan G. Matthews, Daniel K. Hedges and Linda L. Addison, Jerome P. Owens, Houston, for respondent.

BARROW, Justice.

This suit was instituted by Nelson Bunker Hunt, Herbert Hunt and Lamar Hunt (Hunt) seeking damages against Coastal States Gas Producing Company and Coastal States Marketing, Inc. (Coastal States) for the alleged conversion of oil to which Hunt was entitled by virtue of a concession agreement with Libya. Coastal States counterclaimed for damages for Hunt's allegedly tortious interference with the contract and business opportunities of Coastal States. Both parties moved for summary judgment on the issue of liability after extensive development of the case. The trial court denied relief on all claims and the court of civil appeals affirmed. 570 S.W.2d 503. We affirm the judgment of the court of civil appeals.

In 1957 the Government of Libya granted Hunt a concession which gave him the right, for fifty years, to explore, drill and extract oil in an area now identified as the Sarir field. Hunt assigned a one-half undivided interest in this concession to British Petroleum Exploration Company, Ltd. (British Petroleum) in 1960. Oil was discovered in the concession area in 1961 and, by 1967, it was produced in marketable quantities. In September 1969, Colonel Mu'ammar al-Qadhafi assumed power in Libya under a new government, the Revolutionary Command Council, and commenced making changes in the existing contractual relations with the various oil producers holding concession agreements with Libya. In 1971, the Libyan Government nationalized the operations and interest of British Petroleum in the Sarir field and transferred its rights to the Arabian Gulf Exploration Company (AGECO). AGECO is a corporation whose entire capital stock is owned by the Libyan Government.

On June 20, 1973, by Libyan Law No. 42 of 1973, the Libyan Government nationalized all the rights and assets of Hunt in the concession agreement and assigned these rights to AGECO. Although Libya agreed to pay compensation, the amount was to be determined by a committee designated by the State. In response to this action, Hunt published notices in newspapers throughout the world claiming that the Libyan nationalization violated international law and threatened suit against anyone who came into possession of Sarir oil. In May 1973, Coastal States entered into a contract with AGECO to purchase oil from the Sarir field and it continued to purchase oil under this contract despite Hunt's claims against Libya and threatened suits. This oil was transported by Coastal States to a refinery in Italy where it was processed and sold to third parties. It was stipulated that a portion of the products derived from this oil was subsequently taken to the United States, although it was not stipulated that Coastal States transported or caused any of such products to be brought here. Nevertheless, Coastal States is domiciled in the United States and, at least, the net proceeds derived from the Sarir oil were brought here and are the basis of Hunt's suit for conversion.

British Petroleum was a party to the controversy with Coastal States at one time, but it subsequently entered into a full settlement with the Libyan Government after arbitration of its claim and it does not now assert any claim against Coastal States. ¹ In May 1975 Hunt entered into a settlement agreement with the Libyan Government whereby, for the sum of approximately Both the trial court and the court of civil appeals concluded that the trial court was foreclosed from inquiring into the validity of the Libyan nationalization of Hunt's interest in the Sarir field by the Act of State Doctrine. These courts further concluded that as a matter of law, Hunt's actions in giving notice of his claim to oil from the Sarir field did not violate either state or federal law and would not support Coastal States' claim for damages for tortious interference. Hunt and Coastal States both filed applications for writ of error and complain of the take-nothing judgment entered on the claim of each.

$19,000,000, it released any and all claims against the Libyan Government arising out of the nationalization of the Sarir field. Coastal States was not a party to this agreement and Hunt now seeks to recover the proceeds realized by Coastal States from oil allegedly purchased from AGECO prior to the May 1975 settlement.

APPEAL BY HUNT

Hunt's claim against Coastal States is necessarily based upon the assertion that Libya's expropriation was invalid so that Coastal States acquired no title from AGECO. The critical question involved in Hunt's appeal is the applicability of the Act of State Doctrine and more precisely, whether Hunt's suit comes within the exception to the doctrine created by the Hickenlooper Amendment, 22 U.S.C. § 2370(e)(2). The lower courts have held that the doctrine bars inquiry by a Texas court into the validity of acts done by a foreign sovereign.

The Act of State Doctrine is a judicially created doctrine of restraint. The landmark case of Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398, 84 S.Ct. 923, 11 L.Ed.2d 804 (1964) reaffirmed the doctrine as originally articulated in Underhill v. Hernandez, 168 U.S. 250, 18 S.Ct. 83, 42 L.Ed. 456 (1897) in the following language:

"Every sovereign State is bound to respect the independence of every other sovereign State, and the courts of one country will not sit in judgment on the acts of the government of another, done within its own territory. Redress of grievances by reason of such acts must be obtained through the means open to be availed of by sovereign powers as between themselves."

In Sabbatino it was stated that the doctrine "arises out of the basic relationships between branches of government in a system of separation" and the courts prior recognition of the doctrine "expresses the strong sense of the Judicial Branch that its engagement in the task of passing on the validity of foreign acts of state may hinder rather than further this country's pursuit of goals both for itself and for the community of nations as a whole in the international sphere."

In Hunt v. Mobil Oil Corp., 550 F.2d 68 (2d Cir. 1977), Cert. denied, 434 U.S. 984, 98 S.Ct. 608, 54 L.Ed.2d 477, the Act of State Doctrine was held to bar Hunt's inquiry into the validity of Libya's nationalization of Hunt's concession. In holding that the trial court properly dismissed Hunt's claim against seven major oil producers in the Persian Gulf area for damages under the anti-trust statute, the circuit court said:

"We conclude that the political act complained of here was clearly within the act of state doctrine and that since the disputed pleadings inevitably call for a judgment on the sovereign acts of Libya the claim is non-justiciable."

This final judgment against Hunt in that case controls his present suit for conversion unless it comes within the exception to the Act of State Doctrine created by the Hickenlooper Amendment. Benson v. Wanda Petroleum Company, 468 S.W.2d 361 (Tex.1971).

The Hickenlooper Amendment was enacted by Congress in 1964 shortly after the Sabbatino holding and in obvious reaction to it. It provides in part:

"(N)o court in the United States shall decline on the ground of the federal act of state doctrine to make a determination on the merits giving effect to the principles of international law in a case in 22 U.S.C. § 2370(e)(2). It must be recognized at the outset that this exception which was adopted over the objections of the Executive Department of the United States has been narrowly construed by our courts. Occidental of Umm Al Qay., Inc. v. Cities Serv. Oil Co., 396 F.Supp. 461 (D.C.La.), Aff'd in part, 577 F.2d 1196 (5th Cir. 1978), Petition for cert. filed, --- U.S. ----, 99 S.Ct. 1276, 59 L.Ed.2d 491 (1978); Occidental Petroleum Corp. v. Buttes Gas & Oil Co., 331 F.Supp. 92 (D.C.Cal.) Aff'd, 461 F.2d 1261 (9th Cir. 1972), Cert. denied, 409 U.S. 950, 93 S.Ct. 272, 34 L.Ed.2d 221; United Mexican States v. Ashley, 556 S.W.2d 784 (Tex.1977).

which a CLAIM OF TITLE OR OTHER RIGHT TO PROPERTY is asserted by any party including a foreign state . . . based upon (or traced through) a confiscation or other taking . . . by an act of that state in violation of the principles of international law . . .." (Emphasis Added)

The statute enumerates three requirements which must exist in order to avoid the Act of State Doctrine under the Hickenlooper Amendment. 1. Expropriated property must come within the territorial jurisdiction of the United States. 2. The act of the expropriating nation must be in violation of international law. 3. The asserted claim must be a claim of title or other right to property. 22 U.S.C. § 2370(e)(2). The court of civil appeals concluded, without consideration of the first two requirements, that the Hickenlooper Amendment is not applicable to this case because Hunt acquired only a contract right by the agreement with Libya. We agree with this conclusion and therefore limit our consideration to the third requirement stated above.

Since Libya is both the place of the contract's execution and performance as well as the location of the subject matter, Libyan substantive law governs the interpretation and construction of the rights conferred to Hunt by the Concession Agreement. Cantu v. Bennett, 39 Tex. 304 (1873).

The Concession Agreement expressly provides that the applicable law is the Libyan Petroleum Law No. 25 of 1955 and this law provides in part:

"(1) All petroleum in Libya in its natural state in strata is the property of the Libyan State.

"(2) No person shall explore or prospect...