Hunt v. Mobil Oil Corp.
| Decision Date | 12 October 1978 |
| Docket Number | 75 Civil 1160. |
| Citation | 465 F. Supp. 195 |
| Parties | Nelson 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. |
| Court | U.S. District Court — Southern District of New York |
COPYRIGHT MATERIAL OMITTED
Kramer, Lowenstein, Nessen, Kamin & Soll, New York City, Hirschkop & Grad, P. C., Alexandria, Va., for plaintiffs; Daniel P. Levitt, Ellen R. Nadler, Kenneth Berlin, Jeffrey T. Golenbock, Philip J. Hirschkop, New York City, of counsel.
Howrey & Simon, Washington, D. C., Richard H. Zahm, Jr., Juliet Shepard, S. J. Bird, Mobil Oil Corp., New York City, for defendant Mobil Oil Corp.; Edward F. Howrey, A. Duncan Whitaker, Mark D. Wegener, Bruce A. Deerson, Washington, D. C., of counsel.
Charles F. Kazlauskas, Jr., Lawrence R. Jerz, G. Kenneth Handley, Texaco, Inc., White Plains, N. Y., Kaye, Scholer, Fierman, Hays & Handler, New York City, for
defendant Texaco Inc.; Milton Handler, Milton J. Schubin, Randolph S. Sherman, New York City, of counsel.
Lord, Day & Lord, New York City, Pillsbury Madison & Sutro, San Francisco, Cal., for Standard Oil Co. of California; Gordon B. Spivack, John W. Castles, III, Harry G. Sklarsky, David H. Marks, Carolyn T. Ellis, New York City, Richard J. MacLaury, Turner H. McBaine, Wallace L. Kaapcke, Thomas E. Haven, San Francisco, Cal., of counsel.
Shea Gould Climenko & Casey, New York City, for defendant The British Petroleum Co., Ltd.; Bruce A. Hecker, Joseph Ferraro, Richard F. Czaja, New York City, of counsel.
Cravath, Swaine & Moore, New York City, for defendant Shell Petroleum Co., Ltd.; John R. Hupper, Douglas D. Broadwater, Thomas J. Sweeney, III, Thomas J. Dougherty, New York City, of counsel.
Sullivan & Cromwell, Albert P. Lindemann, Jr., Exxon Corp., New York City, for defendant Exxon Corp.; Robert MacCrate, Robert M. Osgood, H. Lake Wise, Elizabeth McLain Olmsted, Barbara A. Mentz, New York City, of counsel.
John E. Bailey, Charles O. Murray, III, A. Randall Friday, Gulf Oil Corp., Houston, Tex., Frank W. Morgan, Frank R. O'Hara, Gulf Oil Corp., Pittsburgh, Pa., for defendant Gulf Oil Corp.
Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for defendant Occidental Petroleum Corp.; Louis Nizer, Robert R. Salman, Michael Dore, Walter S. Beck, New York City, of counsel.
Leo Larkin, Morris Handel, Grace Petroleum Corp., New York City, for defendant Grace Petroleum Corp.
OPINION, FINDINGS OF FACT AND CONCLUSIONS OF LAW
This antitrust suit, involving claims and counterclaims for hundreds of millions of dollars among some of the world's largest oil companies, arises out of events in the Middle East, particularly Libya, in the early 1970's. Plaintiffs are three brothers: Nelson Bunker Hunt, W. Herbert Hunt and Lamar Hunt, who as partners owned a concession in Libya for the exploration, development and production of crude oil.1 The defendants are: Mobil Oil Corporation ("Mobil"); Texaco, Inc. ("Texaco"); Standard Oil Company of California ("Socal"); The British Petroleum Company, Ltd. ("BP"); Shell Petroleum Company, Ltd. ("Shell"); Exxon Corporation ("Exxon"); and Gulf Oil Corporation ("Gulf").2 All the defendants, save Gulf, had production in Libya, and each also owned concessions with substantial production in the Persian Gulf nations. The defendants are herein referred to as the "major oil companies," the "majors" or "Persian Gulf producers." Other companies that owned and operated oil concessions in Libya included Occidental Petroleum Corporation ("Occidental"), Grace Petroleum Corporation ("Grace"), Gelsenberg A.G. ("Gelsenberg"), Amerada Hess ("Amerada Hess" or "Hess"), Atlantic Richfield Company ("ARCO"), Continental Oil Company ("Continental") and Marathon Oil Company ("Marathon"). These companies and Hunt are generally referred to as the "independents," "the Libyan independents," or "the non-Persian Gulf producers."
This action centers about efforts of the majors and independents to resist the demands of oil-producing nations in the Middle East. In January 1971, Hunt, the other independents and the major oil companies entered into an agreement, the Libyan Producers' Agreement ("LPA"),3 designed to present a united industry front to withstand increasingly aggressive actions by the Libyan government. In brief, under one provision of the LPA, the parties agreed to share the burden of production cutbacks imposed by the Libyans by providing the cutback party with replacement crude oil at producers' tax-paid cost.
Plaintiffs claim that defendants imposed an illegal customer and territorial restriction on resale of crude oil transferred to them under the LPA and that this restriction deprived them of access to the competitive market and forced them to sell the crude at distress prices. They assert an additional claim that the defendants conspired to withhold many millions of barrels of crude oil to which plaintiffs were entitled under the agreement. Both the alleged restriction and the alleged boycott are challenged as violations of section 1 of the Sherman Antitrust Act4 and section 73 of the Wilson Tariff Act.5 Defendants deny the antitrust charges; they assert counterclaims for rescission of an extension of the agreement and for restitution based upon allegations that plaintiffs committed fraud by concealment of material facts.
The case came to trial after extensive pretrial discovery, which included oral depositions of parties and witnesses taken here and in various foreign countries, answers to interrogatories, document production and answers to requests for admissions. The discovery process resulted in a pretrial record of thousands upon thousands of pages of testimony and documents. The trial itself took thirty-eight days, with a record of more than 7000 pages. At the trial, twenty-four witnesses testified. Since the trial was to the Court, some testimony and a number of exhibits which include obvious hearsay were nonetheless received in evidence in an effort to expedite the trial. The Court repeatedly observed that its determination would be based only upon relevant and material evidence.6
To put matters in proper perspective, it is desirable to set forth events preceding, contemporaneous with and subsequent to the signing of the agreement that is at the center of the controversy. In 1957, Hunt acquired from the Libyan government an oil concession known as the Sarir field. Three years later, Hunt assigned an undivided one-half interest in the concession to the British Petroleum Exploration Company (Libya). The Sarir field came "on stream" in 1967 and by 1970 was producing approximately 400,000 barrels of crude oil per day, with reserves estimated at half a billion barrels. In 1970, all the majors, except Gulf, were engaged in oil production in Libya, either on their own or in joint ventures with one or more other companies.7 The majors also had extensive oil-producing holdings in the Persian Gulf nations: Bahrain, Iran, Iraq, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.8
On September 1, 1969, Colonel Moamer Qaddafi and his Revolutionary Command Council ("RCC") overthrew King Idris and seized control of the reins of state. The new regime soon confronted the oil companies operating in Libya with demands for substantial increases in the "posted price"— used by the host government to compute taxes and royalties—of crude oil. Early in 1970, after the companies failed to yield in the first round of negotiations, the Libyans adopted a strategy which they continued to use in exacting concessions from the oil companies: they would single out a vulnerable company, threaten or impose production cutbacks to force it to yield to a demand, and upon its capitulation use the compelled terms as the basis of its bargaining position with the other companies. Occidental was the first to fall prey to this tactic, acceding to increases in the posted price and the tax rate on September 4, 1970, after the government had imposed production cutbacks. By October the Libyans had forced the other companies to yield.
The ever-escalating demands and hostile attitude of the RCC led the executives of the oil companies to consider means of effectively resisting further demands. Both the independents and the majors recognized the desirability of a united negotiating front and a mutual help program whereby production losses sustained by one company would be shared by all. One idea which surfaced during this period, in several contexts, was that a company would be in a stronger position to resist the new Libyan demands if the intended victim had an alternative source of crude oil in the event of a government-imposed restriction on production. The suggestion of mutual aid, however, did not advance beyond the discussion stage at that time.
The surrender by the majors and independents to the Libyan demands in the fall of 1970 did not bring peace in their time. Hardly had the compelled increases been in effect when the Organization of Petroleum Exporting Countries ("OPEC") met in Caracas, Venezuela in December 1970 and decided to demand even further increases in "government take," including posted price and tax rates. The Conference passed, inter alia, Resolution XXI.120 which provided that joint negotiations between the Persian Gulf nations and the companies operating in those countries begin on January 12, 1971 in Teheran.
Libya quickly moved into action. On January 3, the Libyan government summoned local representatives of the oil companies and outlined plans for implementation of the Caracas Resolutions. The demands for increases in posted price and tax rates beyond those agreed to in September and October were backed by the...
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