National Petrochemical Co. v. M/T Stolt Sheaf, 86 Civ. 7505.

• Decision Date: 04 October 1989
• Docket Number: No. 86 Civ. 7505.,86 Civ. 7505.
• Citation: 722 F. Supp. 54
• Parties: NATIONAL PETROCHEMICAL CO. OF IRAN, Plaintiff, v. The M/T STOLT SHEAF, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

722 F. Supp. 54

NATIONAL PETROCHEMICAL CO. OF IRAN, Plaintiff, v. The M/T STOLT SHEAF, et al., Defendants.

No. 86 Civ. 7505.

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

October 4, 1989.

Richard D. Gaines, New York City, for plaintiff.

Haight, Gardner, Poor & Havens, New York City (Brian D. Starer, Charles B. Anderson, Richard A. Menchini, Don P. Murnane, Jr., of counsel), for defendants.

MEMORANDUM AND ORDER

OWEN, District Judge:

This case is but one of the many consequences of Iran's having seized 52 American hostages in November, 1979. While Americans remained hostage and in retaliation for Iran's role in the hostage situation, President Carter by executive order embargoed exports from the United States of certain chemicals. Desperate for United States supplies, the plaintiff, National Petrochemical Co. ("NPC"), an instrument of the Iranian government, tried to circumvent the embargo "by entering into an illegal scheme to purchase the needed chemicals through a series of middlemen...." National Petrochemical Co. of Iran v. The M/T Stolt Sheaf, 860 F.2d 551, 552 (2d Cir.1988). Because of the outbreak of the Iran-Iraq War, the disguised and illegal shipment never arrived in Iran, and one of the middlemen, Rotexchemie Brunst & Co. ("Rotex"), successfully resold the chemicals in Taiwan.

In this action, NPC seeks to recover the value of the cargo from the ship owners, who made the M/T Stolt Sheaf available to the middlemen for shipment of the chemicals from Houston to Barcelona and from Barcelona to Iran, alleging that the shipping interests negligently and conspiratorially permitted Rotex to divert the chemicals. Previously, relying on the then-opposition of the United States Department of State, I dismissed the action because the United States had not recognized the Iranian government, and consequently United States courts were closed to Iran and its instrumentalities. 671 F.Supp. 1009 (S.D. N.Y.1987). While NPC's appeal of that dismissal was pending before the Second Circuit, the State Department rethought its position as to just this case, urging that "the Iranian government and its instrumentality should be afforded access to our courts for purposes of resolution of the instant dispute." As a result, the Second Circuit reversed the initial dismissal, holding that access was not barred.¹

Now on remand, the defendants again move to dismiss or for summary judgment on all claims, arguing that NPC may not seek recovery of losses sustained in its knowing efforts to violate United States law. Because public policy forbids courts to aid parties in their attempts to recover on illegal contracts, dismissal on that ground is mandated. "A party to an illegal contract cannot ask a court of law to help him carry out his illegal object, nor can such a person plead or prove in any court a case in which he, as a basis for his claim, must show forth his illegal purpose...." Stone v. Freeman, 298 N.Y. 268, 271, 82 N.E.2d 571, 572 (1948). Agreements with alien enemies during wartime, agreements that would violate foreign or forum laws, and agreements against the public policy of the forum, are all unenforcable. Williston on Contracts 3d Ed., §§ 1747, 1748, 1752. The use of agents to effectuate such agreements does not alter their illegality. See Tarbert Trading, Ltd. v. Cometals, Inc., 663 F.Supp. 561 (S.D.N. Y.1987); Williston, § 1747 n. 3.

The agreement at issue in this case was illegal under the laws of the United States and Iran,² and under the laws of other jurisdictions involved. This illegality was recognized by the Second Circuit in its recent opinion, 860 F.2d at 552, in which the Court observed that the bills of lading pertaining to this shipment of chemicals had been forged to show false origin and destination. Moreover, this falsification was within the knowledge and with the consent of NPC's agents. Kunhi Mohamed, the...