National Iranian Oil Co. v. Mapco Intern., Inc.

Decision Date28 December 1992
Docket NumberNo. 91-3879,91-3879
Citation983 F.2d 485
CourtU.S. Court of Appeals — Third Circuit

Stephen M. Truitt (argued) and Susan L. Launer, Pepper, Hamilton & Scheetz, Washington, DC, for appellant.

Louis C. Lustenberger (argued) and George R. Hinckley, Jr., Donovan Leisure Newton & Irvine, New York City, for appellee.

Before: COWEN, NYGAARD and SEITZ, Circuit Judges.


COWEN, Circuit Judge.

Appellant National Iranian Oil Company ("NIOC") petitioned the district court to compel arbitration of a contract dispute under section 4 of the Federal Arbitration Act, 9 U.S.C. § 4 (1988). The district court borrowed the Delaware statute of limitations for contract claims and dismissed NIOC's petition as untimely. NIOC contends that section 4 permits only the arbitrator, and not the district court, to adjudicate the timeliness of a petition to compel arbitration. NIOC also moves to dismiss this appeal and vacate the district court's opinion on the grounds of mootness. We conclude that this appeal is not moot and that the district court properly dismissed NIOC's petition for exceeding the applicable statute of limitations. We therefore will affirm.


On April 23, 1979, plaintiff NIOC, an Iranian corporation, and defendant Mapco International, Inc. ("Mapco"), a Delaware corporation, entered into Crude Oil Sale/Purchase Contract No. 129, which contains the following arbitration clause:

Any dispute between the parties arising out of this contract shall be settled by arbitration.

The party who wants to submit such a dispute to arbitration, shall advise the other party in writing, stating therein its claim and nominating its arbitrator. The other party shall nominate a second arbitrator within 30 days after receiving said advice.

The two arbitrators thus appointed shall appoint a third arbitrator who shall be the president of the board of arbitration. Should the other Party fail to appoint and nominate the second arbitrator or should the two arbitrators fail to agree on the appointment of the third arbitrator within 30 days, the interested party may request the President of the Appeal Court of Tehran, Iran to appoint the second arbitrator or the third arbitrator as the case may be.


The award shall be governed by and interpreted according to the laws of Iran.

The seat of arbitration shall be in Tehran, unless otherwise agreed by the parties.

App. at 15-16. The contract also provided that it shall be governed and construed according to Iranian law.

In October and November of 1979, NIOC sold and delivered crude oil to Mapco in Iran pursuant to the contract's terms. Mapco has not paid the contract price of $8,598,987.10.

On June 25, 1984, NIOC notified Mapco of its demand for arbitration and its appointment of an arbitrator. At Mapco's request, NIOC granted an extension until September 30, 1984 to appoint an arbitrator, but Mapco never did so. On October 4, 1984, Mapco telexed NIOC, stating that it no longer considered itself bound by the arbitration agreement because of changed conditions in Iran. The parties continued to communicate until early 1987 without resolution.

On November 21, 1990, NIOC filed its petition to compel arbitration under 9 U.S.C. § 4 in the United States District Court for the District of Delaware (Civ. No. 90-682). The petition requests that the court order arbitration in the District of Delaware. Mapco moved for judgment on the pleadings and for summary judgment on three grounds. First, Mapco argued that the petition is barred by the statute of limitations. Second, Mapco argued that NIOC is collaterally estopped from seeking to compel arbitration because of the judgment in National Iranian Oil Co. v. Ashland Oil, Inc., 817 F.2d 326 (5th Cir.), cert. denied, 484 U.S. 943, 108 S.Ct. 329, 98 L.Ed.2d 356 (1987). In Ashland Oil, Inc., the court held that NIOC could not compel arbitration in the United States of a dispute involving an oil supply contract with an identical arbitration clause. See id. at 328, 334-35. Third, Mapco argued that the court lacks the power to compel arbitration in Delaware. According to Mapco, the Arbitration Act only allows the district court to compel arbitration within its own district and in accordance with the arbitration agreement's terms. The forum-selection clause in the agreement specifies Iran, and the district court arguably could not order arbitration in Delaware because then the order would conflict with the agreement's terms. 1 The district court applied Delaware's three-year statute of limitations for contract claims, Del.Code Ann. tit. 10, § 8106 (1975), and dismissed the petition as time-barred. National Iranian Oil Co. v. Mapco Int'l, Inc., 1991 WL 255369, at * 3-* 4 (D.Del. Nov. 12, 1991). The court did not consider the other grounds for dismissal. NIOC filed this appeal.

NIOC also has two related lawsuits presently pending. On May 7, 1991, NIOC filed a complaint against Mapco in the United States District Court for the District of Delaware (Civ. No. 91-269), alleging breach of the same oil supply contract which is the subject of NIOC's petition to compel arbitration. On May 22, 1991, NIOC filed a complaint against Mapco in the United States District Court for the Western District of Oklahoma (Civ. No. 91-731-R), alleging breach of the same contract.

On March 9, 1992, Mapco filed a voluntary petition under Chapter 11 of the Bankruptcy Code in the United States District Court for the Northern District of Oklahoma. The schedules filed by Mapco in the bankruptcy court list as assets a claim in arbitration valued at $383,036 and $994 in cash. Total liabilities are listed as $28,375,565.

The bankruptcy court lifted the automatic stay with regard to this appeal. NIOC has moved to dismiss its appeal and vacate the district court's judgment on the grounds of mootness because Mapco allegedly lacks the assets to satisfy a judgment.

The district court had jurisdiction under 28 U.S.C. § 1332(a)(4) (1988), and we have jurisdiction under 28 U.S.C. § 1291 (1988). This appeal raises pure questions of law subject to plenary review. Ballay v. Legg Mason Wood Walker, Inc., 925 F.2d 682, 684 (3d Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 79, 116 L.Ed.2d 52 (1991). The order of dismissal did not specify whether it was granting Mapco's Fed.R.Civ.P. 12(c) motion for judgment on the pleadings, or its Fed.R.Civ.P. 56(c) motion for summary judgment. In either case, we view the facts and the inferences to be drawn therefrom in the light most favorable to NIOC, the nonmoving party. Clement v. Consolidated Rail Corp., 963 F.2d 599, 600 (3d Cir.1992) (summary judgment); Jablonski v. Pan American World Airways, Inc., 863 F.2d 289, 290-91 (3d Cir.1988) (judgment on the pleadings).


NIOC claims that its appeal is moot because Mapco lacks assets with which to satisfy a judgment. If this appeal is moot, the district court's judgment must be vacated and will have no res judicata or collateral estoppel effect. See United States v. Munsingwear, Inc., 340 U.S. 36, 39-41, 71 S.Ct. 104, 106-07, 95 L.Ed. 36 (1950); Clarendon Ltd. v. Nu-West Indus., Inc., 936 F.2d 127, 130 (3d Cir.1991) (where mootness of appeal is not attributable to any party's actions, district court's order must be vacated).

Under Article III of the Constitution, federal courts cannot decide moot cases because the exercise of judicial power depends upon the existence of a case or controversy. DeFunis v. Odegaard, 416 U.S. 312, 316, 94 S.Ct. 1704, 1705-06, 40 L.Ed.2d 164 (1974). We have described the constitutional requirement as having three elements: (1) a legal controversy that is real and not hypothetical, (2) that affects an individual in a concrete manner so as to provide the factual predicate for reasoned adjudication, and (3) with sufficiently adverse parties so as to sharpen the issues for judicial resolution. International Bhd. of Boilermakers v. Kelly, 815 F.2d 912, 915 (3d Cir.1987) (quoting Dow Chem. Co. v. United States EPA, 605 F.2d 673, 678 (3d Cir.1979)). A case is not moot if there is a "real and substantial controversy admitting of specific relief through a decree of a conclusive character." Id. (quoting Aetna Life Ins. Co. v. Haworth, 300 U.S. 227, 241, 57 S.Ct. 461, 464, 81 L.Ed. 617 (1937)).

A case is saved from mootness if a viable claim for damages exists. Durkin v. National Bank of Oliphant, 772 F.2d 55, 59 (3d Cir.1985); Jersey Central Power & Light Co. v. State of New Jersey, 772 F.2d 35, 41 (3d Cir.1985). "Damages should be denied on the merits, not on grounds of mootness." 13A C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3533.3, at 262 (1984). Even where the amount of damages at issue is minute, a case is not moot so long as the parties have a concrete interest, however small, in the outcome of a litigation. Ellis v. Brotherhood of Ry., Airline and S.S. Clerks, 466 U.S. 435, 442, 104 S.Ct. 1883, 1889, 80 L.Ed.2d 428 (1984). A case, however, is moot if there will never be any possibility of satisfying a favorable judgment, thus permanently precluding all forms of relief. Triland Holdings & Co. v. Sunbelt Service Corp., 884 F.2d 205, 208 (5th Cir.1989).

In this case, the defendant Mapco has about $394,000 in assets and $28,000,000 in liabilities. Plaintiff NIOC is suing for approximately $8,600,000 in damages plus interest accrued over thirteen years. It is unlikely that NIOC will ever be able to recover more than a small fraction of the relief requested. Nonetheless, we cannot say with confidence that the plaintiff will never be able to collect any money damages from the defendant. A viable damages claim exists and therefore this case is not moot.

NIOC's reliance on Adams v. Resolution Trust Corp., 927 F.2d 348 (8th Cir.1991), is misplaced. In Adams, plaintiff sued a failed savings and loan association for fraudulently...

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