Morgan Equipment v. Novokrivorogsky Ore Mining

• Decision Date: 13 October 1998
• Docket Number: No. C 94-1231 CW.,C 94-1231 CW.
• Citation: 57 F.Supp.2d 863
• Court: U.S. District Court — Northern District of California
• Parties: MORGAN EQUIPMENT CO., Plaintiff, v. NOVOKRIVOROGSKY STATE ORE MINING AND PROCESSING ENTERPRISE, Defendant.

57 F.Supp.2d 863

MORGAN EQUIPMENT CO., Plaintiff, v. NOVOKRIVOROGSKY STATE ORE MINING AND PROCESSING ENTERPRISE, Defendant.

No. C 94-1231 CW.

United States District Court, N.D. California.

October 13, 1998.

Douglas N. Akay, Akay & Associates, Martin D. Goodman, San Francisco, CA, for Krivoy Rog State Mining-Metalurgical Factory, Plaintiff.

Roderick A. McLeod, Brobeck Phleger & Harrison LLP, San Francisco, CA, for Morgan Equipment Co., defendant.

ORDER GRANTING DEFENDANT'S RULE 60(B)(4) MOTION

WILKEN, District Judge.

Defendant Krivoy Rog State Mining-Metallurgical Factory, successor-in-interest to Novokrivorogsky State Ore Mining and Processing Enterprise, (the Mine)¹ moves, pursuant to Rule 60(b) of the Federal Rules of Civil Procedure (Fed.R.Civ. P.), for relief from judgment. Plaintiff Morgan Equipment Company (Morgan) opposes the motion. The matter was heard on September 25, 1998. Having considered all of the papers filed by the parties and oral argument on the motion, the Court grants Defendant's motion.

BACKGROUND

Morgan is a California-based, American corporation engaged in the distribution of construction and mining equipment, supplies, and parts. The Mine is a Ukrainian mining corporation, which is more than fifty percent state-owned and centered in Krivoy Rog, Ukraine.

This case arises out of a series of contracts between Morgan and the Mine. After Harold Morgan, President of Morgan, and Oleg Vasieleyvich Khrapko, General Secretary of the Mine, met in London in 1992, the parties entered into a barter contract later that year. Kerry Donahoe, Morgan's Vice-President, traveled to Krivoy Rog, Ukraine, where he and Khrapko negotiated and executed the contract. Morgan delivered machinery to the Mine, in exchange for approximately 60,000 metric tons of iron ore concentrate.

On or about October 23, 1992, Morgan and the Mine entered into a second contract ("Contract 954/93"), which forms the crux of the parties' present dispute. In its final form, Contract 954/93 provided that Morgan would provide the Mine with certain items of equipment in exchange for the delivery of 333,000 metric tons of iron ore concentrate. The parties are in substantial disagreement about where negotiations took place, the extent of negotiations, the actual terms of the contract, the events leading up to and constituting the Mine's partial performance, and the subsequent breach of the contract.

Morgan asserts that Contract 954/93 was extensively and entirely negotiated in San Francisco. In anticipation of this contract, Donahoe and Richard McMurray, Morgan's Manager for International and Special Projects, traveled to Ukraine "to gain a better understanding of [the Mine's] operations and its equipment needs." Donahoe Decl. at ¶ 7. During the trip, Morgan's representatives also pursued business discussions with other mines in the area. Donahoe and McMurray both assert that they met with Khrapko several times to discuss the Mine's equipment, parts, and supplies requirements for the coming year. These discussions resulted in a "Letter of Protocol" that Donahoe and McMurray described as a mere memorialization of the Mine's anticipated needs. Both of these representatives of Morgan state that they had no authority to negotiate a contract for Morgan and that they had not conducted any research regarding availability or prices of the equipment desired by the Mine.

According to Morgan, Khrapko arrived in San Francisco on or about October 13, 1992 with a draft of the contract. Morgan asserts that Harold Morgan and Donahoe discussed each clause of the contract with Khrapko. During these negotiations, Morgan states that the parties raised the price per ton for the iron ore to $19.00, added and deleted items of equipment from Khrapko's list, and changed the quantities of other equipment.

Morgan further contends, and the Mine denies, that the Mine promised that Morgan would receive the Mine's entire export allocation. Contract 954/93, which contains an integration clause, makes no mention of any exclusivity agreement. Morgan states that, in entering into the contract, it relied on this promise.

It is undisputed that the parties jointly attended the MINExpo International '92, a convention for manufacturers and suppliers of industrial and mining equipment and parts. Morgan states that the purpose of this trip to Las Vegas was to allow Khrapko to meet with Morgan's suppliers. Although Morgan asserts that the parties spent considerable time shopping for better prices on equipment, it is uncontested that the terms of Contract 954/93 were not altered as a result of any meetings at the convention.

The final draft of Contract 954/93 was signed on or about October 23, 1992, in San Francisco.

On or about March 29, 1993, the parties entered into two agreements that superseded Contract 954/93. Morgan asserts that these modifications resulted from a directive from the Ukrainian government, and that Morgan only reluctantly consented. One of these two substitute agreements (Contract 328/1) provided that 151,000 tons of iron ore concentrate would be delivered in exchange for certain equipment. The second substitute agreement (Contract 328/2) provided that 150,000 tons of iron ore concentrate would be delivered in exchange for a cash payment of $2,565,000. Morgan concedes that these two new contracts were negotiated either by telephone or in Ukraine. Indeed, Morgan states that Donahoe was not provided with an English translation of the documents before signing. Donahoe asserts that he believed at the time that the new contracts were the substantive equivalent of Contract 954/93.

Morgan maintains that it was prepared in March, 1993, to perform its obligations under Contract 954/93. Morgan further asserts that because the Mine failed to ship the ore as scheduled, the third-party purchaser failed to make payments to Morgan. In addition to substantial consequential damages, Morgan argues that it suffered significant losses by failing to pursue other lucrative business opportunities.²

According to Morgan, Contract 954/93 contained a provision stating that disputes arising out of the contract would be arbitrated by a panel located in the country of the non-claimant party. Morgan asserts that when the original contract was replaced by Contracts 328/1 and 328/2, the Mine surreptitiously altered the wording of the arbitration provision to call for arbitration of disputes before the Arbitration Commission of the Chamber of Trade and Commerce in Ukraine.

The Mine presents a story, which, though paralleling Morgan's account in its general outline, differs substantially in several material respects. The Mine states that the overwhelming majority of the negotiations for Contract 954/93 occurred in Ukraine. Khrapko represented the Mine, and Donahoe and McMurray represented Morgan. The Letter of Protocol represented a negotiated partial draft of the contract. The Mine asserts that Contract 954/93, also a barter contract, was a standard contract form used by the Mine. While in Ukraine for negotiations, Donahoe met with representatives from the Bulgarian steel company to whom Morgan eventually sold the ore it received from the Mine.

The Mine further states that, although the contract was sufficiently finalized during the negotiations in Ukraine to complete it by mail, Khrapko invited Harold Morgan to travel to Krivoy Rog for the signing. Morgan declined the invitation due to his poor health, offering instead to pay for all airfare, hotel accommodations, and meals for Khrapko and his wife to come to San Francisco. Khrapko asserts that he accepted this offer even though there was no real business purpose for the trip.

The Mine readily concedes that once Khrapko arrived in San Francisco, the parties made minor alterations to Contract 954/93. The Mine asserts that the total quantity of iron ore it was to deliver and the general contractual terms did not change. The only differences between the draft contract that Khrapko brought with him from Ukraine and the final version of Contract 954/93 were in the quantities of several types of equipment the Mine was to receive and the corresponding price extensions. The parties agree that the final contract was signed in San Francisco.

According to the Mine, the Las Vegas trip that Khrapko and his wife took with representatives from Morgan was not a business trip. Although the parties did attend the MINExpo International '92 convention, no negotiations took place during this excursion and Contract 954/93 was not altered as a result of any events during this trip.

Before the parties had the opportunity to perform Contract 954/93, the Mine states, the Ukrainian Cabinet of Ministers ordered that the contract had to have a currency component. As a direct result of this order, Contract 954/93 was renegotiated and split into two separate contracts. The Mine asserts, and Morgan does not deny, that all negotiations for this modification took place between Khrapko and Donahoe in Ukraine, and that Donahoe signed the contracts on behalf of Morgan.

The Mine states that it was prepared to perform in March or April, 1993, weather permitting. The shipments of ore, however, did not begin until May, 1993 because Morgan failed to provide a sufficient number of barges to receive delivery. The Mine asserts, and Morgan does not deny, that Morgan received approximately 150,000 metric tons of iron ore for which the Mine has yet to receive any payment in cash or equipment. Under the terms of the contract, this iron ore concentrate was worth $2,335,429.79. The Mine instituted arbitration proceedings in Ukraine to recover its losses.

At this point, the parties' accounts converge again. When the Mine sought to compel arbitration in Ukraine, Morgan suggested that the parties meet in Vienna on April 13, 1994 to discuss the dispute. Although the Mine agreed, before the meeting occurred, Morgan filed suit in this Court on April 11, 1994, seeking...