MINPECO SA v. Conticommodity Services, Inc.

• Decision Date: 26 October 1982
• Docket Number: No. 81 Civ. 7619 (MEL).,81 Civ. 7619 (MEL).
• Citation: 549 F. Supp. 857
• Parties: MINPECO S.A., Plaintiff, v. CONTICOMMODITY SERVICES, INC., Conticapital Management, Inc., Conticapital Limited, Norton Waltuch, Nelson Bunker Hunt, Lamar Hunt, William Herbert Hunt, International Metals Investment Co., Ltd., Sheik Mohammed Aboud Al-Amoudi, Sheik Ali Bin Mussalem, Naji Robert Nahas, Gilian Financial, Acli International Commodity Services, Inc., Banque Populaire Suisse, Advicorp Advisory and Financial Corporation, S.A., Mahmoud Fustok, Faisal Bin Abdullah, Merrill Lynch, Pierce, Fenner & Smith, Inc., Bache Halsey Stuart Shields, Inc., E.F. Hutton & Company, Inc., Commodity Exchange, Inc., and The Board of Trade of the City of Chicago, Defendants.
• Court: U.S. District Court — Southern District of New York

549 F. Supp. 857

MINPECO S.A., Plaintiff, v. CONTICOMMODITY SERVICES, INC., Conticapital Management, Inc., Conticapital Limited, Norton Waltuch, Nelson Bunker Hunt, Lamar Hunt, William Herbert Hunt, International Metals Investment Co., Ltd., Sheik Mohammed Aboud Al-Amoudi, Sheik Ali Bin Mussalem, Naji Robert Nahas, Gilian Financial, Acli International Commodity Services, Inc., Banque Populaire Suisse, Advicorp Advisory and Financial Corporation, S.A., Mahmoud Fustok, Faisal Bin Abdullah, Merrill Lynch, Pierce, Fenner & Smith, Inc., Bache Halsey Stuart Shields, Inc., E.F. Hutton & Company, Inc., Commodity Exchange, Inc., and The Board of Trade of the City of Chicago, Defendants.

No. 81 Civ. 7619 (MEL).

United States District Court, S.D. New York.

October 26, 1982.

Cole & Corette, P.C., Washington, D.C., for plaintiff; Theodore Sonde, John E. Corette, III, D. McCarty Thornton, Deborah M. House, Susan Bierman, Washington, D.C., Grand & Ostrow, Paul R. Grand, New York City, of counsel.

Hughes, Hubbard & Reed, New York City, Shank, Irwin, Conant & Williamson, Dallas, Tex., for defendants Nelson Bunker Hunt, William Herbert Hunt, and Lamar Hunt.

Arnold & Porter, Washington, D.C., Gilbert, Segall & Young, New York City, for defendant Banque Populaire Suisse.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendants Conticommodity Services, Inc., Conticapital Management, Inc., Conticapital Ltd., and Norton Waltuch.

Sullivan & Cromwell, New York City, for defendant Bache Halsey Stuart Shields Incorporated.

Curtis, Mallet-Prevost, Colt & Mosle, New York City, for defendant Mahmoud Fustok.

LASKER, District Judge.

The defendants listed in the margin¹ move pursuant to Fed.R.Civ.Pr. 42(b) for an order directing a separate trial on the issue of loss. Defendants contend that Minpeco S.A. ("Minpeco"), is an "arm" of the Peruvian government, and therefore cannot recover damages for losses caused by a rise in the price of silver, because the Peruvian government as a whole benefitted from the rise in price. Defendants assert that the question whether Peru gained or lost as a result of the price increases can be adjudicated expeditiously, and that it would therefore serve the interests of justice to conduct that inquiry before determining defendants' liability.

Minpeco answers that it is not an "arm" of the Peruvian government, but rather a separate and distinct corporate entity, albeit wholly owned by Peru. Moreover, Minpeco asserts that defendants have not alleged any fraud, manipulation or other inequitable conduct which would provide a basis for disregarding its separate corporate existence. Finally, Minpeco argues that the question of the financial impact on Peru of the rise and fall in the silver market is by no means a limited one, and would require substantial and complicated factual inquiries.

Although defendants refer to Minpeco at various times as an "arm" or "agency" of Peru, they offer no factual basis for disputing Minpeco's assertion that it is a corporation, a separate legal entity, organized validly and in good faith, and not immediately prior to the institution of this lawsuit, but in 1974. Thus, the argument that "an antitrust claimant must show injury," (Defendants' Memorandum at 12), while correct, somewhat misstates the issue. The question presented by the instant motion is not whether Minpeco was injured—it alleges that it suffered actual losses of $82.5 million—but whether a gain enjoyed by another entity, the government of Peru, should be offset against Minpeco's loss.

Moreover, even in economic terms, defendants' argument is unpersuasive. Defendants contend that Peru did not lose any money due to the rise in silver prices, because the amounts that it lost on the short sale contracts were set off by their sales of silver at the higher prices. However, the fact that a plaintiff comes out even does not necessarily demonstrate that it has not been injured: it is possible that, but for defendants' alleged activities, Peru would have been in an even better position.

In arguing that Minpeco's corporate existence should be disregarded, defendants rely primarily on Bangor Punta Operations, Inc. v. Bangor & Oroostook Railroad, 417 U.S. 703, 94 S.Ct. 2578, 41 L.Ed.2d 418 (1974). Defendants' reliance on Bangor Punta is misplaced. Contrary to defendants' contention, Bangor Punta did not purport to effectuate a major expansion of the doctrine of piercing the corporate veil: to the contrary, it merely approved the application to the case in question of the "Home Fire principle,"² id. at 710-711, 94 S.Ct. at 2583, the "settled principle of equity that a shareholder may not complain of facts of corporate mismanagement if he acquired his shares from those who participated or acquiesced in the allegedly wrongful transactions." Id. The "Home Fire" principle does not relate to the present action.

Defendants argue that Bangor Punta and other, similar cases hold that:

"You cannot manipulate the corporate form to create one loss when there isn't any. These decisions are really

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