Hunt v. Mobil Oil Corp.

Decision Date23 February 1987
Docket Number75 Civ. 1160 (EW).
Citation654 F. Supp. 1487
PartiesNelson Bunker HUNT, W. Herbert Hunt and, Lamar Hunt, Plaintiffs, v. MOBIL OIL CORPORATION, Texaco, Inc., Standard Oil Company of California, the British Petroleum Company, Ltd., Shell Petroleum Company, Ltd., Exxon Corporation, Gulf Oil Corporation, Occidental Petroleum Corporation, Grace Petroleum Corporation and Gelsenberg, A.G., Defendants, and Amerada Hess Corporation, Continental Oil Company, Hispanoil and Marathon Oil Company, Additional parties to Arbitration and Motion to Confirm.
CourtU.S. District Court — Southern District of New York

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Hirschkop & Grad, P.C., Alexandria, Va. (Philip J. Hirschkop, Jonathan R. Mook, of counsel), Levy, Gutman, Goldberg & Kaplan, New York City (Jeremiah S. Gutman, Eugene N. Harley, of counsel), for plaintiffs.

Shea & Gould, New York City (Bruce A. Hecker, Joseph Ferraro, of counsel), for British Petroleum Co., Ltd.

Lord, Day & Lord, New York City (Gordon B. Spivack, David H. Marks, Carolyn T. Ellis, of counsel), for Chevron Corp. and Gulf Oil Corp.

Pillsbury, Madison & Sutro, San Francisco, Cal. (Thomas E. Haven, of counsel), for Chevron Corp.

Sullivan & Cromwell, New York City (Robert M. Osgood, William H. Knull, III, of counsel), Albert P. Lindermann, Jr., Exxon Corp., New York City, for Exxon Corp.

Howrey & Simon, Washington, D.C. (A. Duncan Whitaker, P.C., Mark D. Wegener, of counsel), R.D. Vock, Mobil Oil Corp., New York City, for Mobil Oil Corp.

Phillips, Nizer, Benjamin Krim & Ballo, New York City (Louis Nizer, Robert R. Salman, Janet P. Kane, of counsel), for Occidental Petroleum Corp.

Cravath, Swaine & Moore, New York City (John R. Hupper, Douglas D. Broadwater, of counsel), Davis, Markel, Dwyer & Edwards, New York City (Thomas J. Sweeney, III, of counsel), for Shell Petroleum Co., Ltd.

Charles O. Murray, III, Chevron U.S.A. Inc., San Ramon, Cal., Charles F. Kazlauskas, Jr., Lawrence R. Jerz, Texaco Inc., White Plains, N.Y., Kaye, Scholer, Fierman, Hays & Handler, New York City (Randolf S. Sherman, of counsel), for Texaco Inc.

Kevin T. O'Reilly, New York City (Randall S. Strange, of counsel), for Grace Petroleum Libya Inc.

Windels, Marx, Davies & Ives, New York City (Daniel V. Duff, Jr., of counsel), for Veba Oel AG.

Dewey, Ballantine, Bushby, Palmer & Wood, New York City (Kenneth H. Holms, Mark Schwartz, of counsel), for Conoco, Inc.

Sherman & Sterling, New York City, for Hispanoil.

OPINION

EDWARD WEINFELD, District Judge.

In March 1975, plaintiffs, Nelson Bunker Hunt, Herbert Hunt and Lamar Hunt, ("the Hunts,") independent oil producers, commenced this action against the world's seven largest oil producing companies: Exxon, British Petroleum ("BP"), Shell, Mobil, Texaco, Chevron and Gulf, ("the Majors"), Occidental Petroleum Corporation ("Occidental") and six other independent oil companies ("the Independents") charging them with antitrust violations and breach of an agreement. The basic controversy centered about the Libyan Production Agreement ("LPA"), entered into in 1971 among the Hunts, the Majors and the Independents, designed to present a united front against increasingly aggressive action by the Libyan government. Under one of its terms, the parties agreed to share the burdens of production cutbacks by the Libyans by providing the cutback party with replacement oil at producers tax paid cost.

Following extensive discovery, which included oral depositions of parties and witnesses taken in the United States and in various foreign countries and a series of pretrial motions and interlocutory appeals, this Court, after an eight-week trial, with a record of more than 7,000 pages and hundreds of exhibits, dismissed the Hunts' antitrust claims against the defendants upon the merits and the defendants' counterclaims for failure of proof. The final judgment entered in November 1978 provided that the Hunts' breach of contract claim, the Majors' and the other defendants' defenses thereto and their counterclaims, which were not resolved in the action, were subject to arbitration as provided for by the LPA. Familiarity is assumed as to that disposition,1 and other related matters.2

The arbitration proceeding was one of delay and continued controversy. More than two years were consumed by a screening process, as arbitrators proposed by one party were rejected by one or more of the other parties before a panel of three arbitrators was finally designated in May 1981. The panel consisted of Kenneth W. Dam, Professor of Law and Assistant Provost of the University of Chicago, Richard J. Medalie, a senior partner in the Washington, D.C. law firm of Friedman & Medalie, and Richard C. Allison, a senior partner in the law firm of Reid & Priest of New York City. Thereafter, another six months were consumed with procedural matters. Originally, there were separate arbitrations as to each separate claimant; finally, the parties agreed upon a consolidated proceeding. The issues in the arbitration included not only the contract claims among the Hunts, the Majors and Occidental, but also extended to those of the eight independent oil companies who were also signatories to the LPA. At some stage of the proceeding the claims or cross-claims of all the Independents, except the Hunts and Occidental, were settled and the arbitration was continued as to all others.

The presentation of evidence did not commence until December 1981, with the Hunts going forward first with their case-in-chief; they rested their case in June 1982. The Majors and Occidental then moved to dismiss most of the Hunts' claims. Prior to the date scheduled for argument of those motions, the parties were notified that arbitrator Dam had been nominated by the President as Deputy Secretary of State of the United States, a nomination that required Senate confirmation. They were also informed that pending the normal delay in confirmation, resulting from security, financial and other governmental checks, Dam was free to participate in the determination of the pending motions. All parties agreed that Dam should continue to serve in the determination of those motions, and argument was heard by the panel over a three-day period. On September 5, 1982, the panel unanimously granted several of the Majors' motions and dismissed some but not all of Hunts' claims. Dam's resignation became effective on September 22, 1982.

Thereafter, on October 14, 1982, the Hunts, despite their prior written consent that the claims already heard be decided by the then constituted panel, demanded replacement of the entire panel and a de novo hearing on all claims, including those already decided by the panel, of which Dam had been a member. The basis for this demand by the Hunts was an allegation that each of the arbitrators had failed to disclose actual or potential conflicts of interest. The Hunts declared that unless their position was accepted, they would refuse to proceed with the arbitration. The Majors, Occidental and other parties to the arbitration disputed the Hunts' allegations against the arbitrators. With matters at a standstill, the Majors and the others moved this Court in December 1982 for an order to compel the Hunts to continue with the arbitration, whereupon the Hunts countered by filing an action in the Supreme Court of the State of New York against the Majors and Occidental. In that action the Hunts, among other matters, sought to vacate the award that had dismissed some of the Hunts claims, based upon alleged "misconduct" by the arbitrators consisting of a failure to disclose actual or potential conflicts of interest.

After argument and briefing by counsel, this Court, in February 1983, enjoined the Hunts from prosecuting the aforesaid State Supreme Court action and directed them to continue with the arbitration.3 Undaunted by that order, which was affirmed on appeal,4 the Hunts commenced two additional state actions. The first action was commenced in the New York State Supreme Court against the AAA and Grace Petroleum Libya Inc. (an Independent not named in the first suit). The Hunts claimed the AAA had (1) violated its fiduciary duty to administer properly the arbitration; (2) failed to render an accounting of fees paid to the arbitrators for their services; (3) permitted the arbitrators to charge excessive fees; and (4) failed to disclose facts with respect to alleged conflicts of interest and appearances of impropriety by one or more of the arbritrators. In the second action, instituted in the Superior Court of the District of Columbia against Dam, the former arbitrator, the Hunts alleged that Dam charged exorbitant fees, double billed, made improper charges of expenses and sought an accounting for all fees received during his services as an arbitrator. In addition, the Hunts sought to examine Dam as to his alleged conflict of interest. This Court stayed those two State actions and on April 24, 1984 again ordered the Hunts to proceed with the arbitration.5 Specifically, in that ruling, this Court noted that upon rendition of a final award by the arbitrators, the Hunts, or any other aggrieved party, were free to raise any claim that the arbitrators acted improperly, were involved in conflicts of interest or engaged in any conduct that impaired the validity of any award; similarly, any alleged impropriety by the AAA that tainted the award could be raised.6 Thereafter, Professor David R. Herwitz of Harvard Law School was designated as the third arbitrator, following which the arbitration proceeded until all parties rested.

In all, sixty-one hearings were held from the commencement of the arbitration in May 1981, to the final hearing on September 20, 1985. The transcript of the hearings consists of 13,671 pages and many hundreds of documents were received in evidence. The parties submitted 439 interim and final briefs, statements and memoranda...

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