PHILIPP BROS., ETC. v. El Salto, SA

• Decision Date: 09 April 1980
• Docket Number: No. 80 Civ. 1570.,80 Civ. 1570.
• Citation: 487 F. Supp. 91
• Parties: PHILIPP BROTHERS DIVISION OF ENGELHARD MINERALS & CHEMICALS CORPORATION, Plaintiff, v. EL SALTO, S.A., Defendant.
• Court: U.S. District Court — Southern District of New York

487 F. Supp. 91

PHILIPP BROTHERS DIVISION OF ENGELHARD MINERALS & CHEMICALS CORPORATION, Plaintiff, v. EL SALTO, S.A., Defendant.

No. 80 Civ. 1570.

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

April 9, 1980.

Golenbock & Barell, New York City, for plaintiff; Stephen M. Rathkopf, Geri S. Krauss, Gary N. Horowitz, New York City, of counsel.

Melvin D. Kraft, P. C., New York City, for defendant; Melvin D. Kraft, Henry S. Middendorf, Thomas J. Burke, New York City, of counsel.

LASKER, District Judge.

In this suit alleging breach of contract by a Guatamalan corporation, the plaintiff moves to confirm an ex parte attachment and for a preliminary injunction. The defendant opposes these motions and moves to dismiss.

In September, October, and November of 1979, Philipp Brothers Division of Engelhard Minerals & Chemical Corporation (Philipp) entered into five contracts with El Salto, S.A. (El Salto) by which El Salto agreed to sell sugar to Philipp. The agreements were in standard written form.¹ From September 1979 through March 1980, there was extensive correspondence between the parties by telex, letter, telephone calls and personal visits. Throughout this period, El Salto contended (and continues to contend) that in addition to the terms of the written contracts, the parties had orally agreed that Philipp would furnish cash advances of up to $750,000. to El Salto to finance purchases of sugar cane for processing in El Salto's mill. When Philipp did not make such advances, El Salto declared the contracts void by telex of February 19, 1980. Philipp has at all times denied that there was any commitment on its part to make cash advances as a condition of the contract. When El Salto declared the contract at an end, Philipp commenced this suit and moved by ex parte order to attach El Salto's assets in this jurisdiction. The motions now pending followed.

The issues raised are:

1. Whether the court has in personam jurisdiction, and, if not, quasi-in-rem jurisdiction over El Salto?

2. Has Philipp established "that it is probable that it will succeed on the merits" within the meaning of CPLR § 6212(a), thereby justifying the continuance of the attachment?

3. Has Philipp shown that it will be irreparably harmed if a preliminary injunction is not granted?

1. Jurisdiction

Relying on Merrill Lynch, Pierce, Fenner & Smith Inc. v. Lecopulos, 553 F.2d 842 (2d Cir. 1977), Philipp contends that this court has personal jurisdiction over El Salto because each of the five contracts between the parties provides for arbitration in New York of any disputes arising under the contract. In Merrill Lynch, the Court of Appeals held that a contract clause requiring that disputes be arbitrated in New York constituted a consent by each party to the jurisdiction of the courts within the state. Quoting its own previous opinion in Victory Transport Inc. v. Comisaria General, 336 F.2d 354, 363 (2d Cir. 1964), cert. denied, 381 U.S. 934, 85 S.Ct. 1763, 14 L.Ed.2d 698, the court observed that "To hold otherwise would be to render the arbitration clause a nullity." 553 F.2d at 844.

It is true that the plaintiff here has not yet demanded the arbitration to which it is entitled under the contract. Such a failure, however, is at least at the moment not fatal. In Merrill Lynch the court rejected the argument that an agreement to arbitrate in New York was not an effective consent to jurisdiction until a demand for arbitration had been made; and remarked:

"That the plaintiff chose instead to file suit and move for a stay—evidently to gain the benefit of attachment—is not improper." Id. at 845.

Accordingly, we find that the court has jurisdiction of the person of El Salto.²

The decision in Sterling National Bank v. Southern Scrap Export Co., 468 F.Supp. 1100 (S.D.N.Y.1979), on which El Salto relies, is not to the contrary. There, among other critical differences, the plaintiff itself was not a party to the arbitration agreement and thus not entitled to the benefits of consent to jurisdiction which it conferred. Id. at 1103 n. 2.

2. Quasi-in-Rem Jurisdiction

El Salto contends that the court does not have quasi-in-rem jurisdiction because El Salto's contacts with New York are not sufficient to satisfy the "minimum contacts" standard of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945), as required as a matter of due process under the Supreme Court's decision in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1977). See also Rush v. Savchuk, ___ U.S. ___, 100 S.Ct. 571, 62 L.Ed.2d 516 (1980). In view of our determination that in personam jurisdiction exists, it is unnecessary to decide whether the court also has quasi-in-rem jurisdiction over El Salto. However, we are substantially impressed by Philipp's argument that El Salto's contacts with New York do satisfy the minimum contacts test, especially in light of the Second Circuit's decision in Intermeat Inc. v. American Poultry Inc., 575 F.2d 1017 (2d Cir. 1978). The facts here establish that 1) the five contracts in question were mailed by Philipp from New York to El Salto, signed by El Salto and returned to Philipp in New York; 2) in the year preceding this lawsuit, El Salto transacted more than $5,000,000. of business with New York sugar buyers, including the plaintiff and four or five other customers; 3) the contracts in question call for payment by letters of credit drawn on New York banks; 4) all of El Salto's contracts, both with Philipp and its other customers in New York, contain a clause calling for arbitration of any disputes in New York. In the circumstances, the words of Intermeat are applicable:

"Where a corporation located in another state is continuously involved in the commerce of New York and has repeatedly consented to arbitration in New York, we see nothing unfair or unreasonable in requiring it to defend in New York an action arising out of such commerce." 575 F.2d at 1023.

3. Probability or Likelihood of Success

To prevail on its motion to confirm the ex parte attachment, Philipp must demonstrate that it will probably succeed on the merits, CPLR § 6212(a), and similarly, to prevail on its motion for a preliminary injunction, it must demonstrate that it is likely to succeed on the merits, Jack Kahn Music Co. v. Baldwin Piano & Organ Co., 604 F.2d 755, 758 (2d Cir. 1979). El Salto claims that Philipp has not established probability or likelihood of success on the merits because, in El Salto's view, the contracts called for advance payments which were not made by Philipp. This argument suffers two defects. First, it begs the question whether such payments were in fact contracted for; second, it assumes that evidence respecting the alleged oral agreement for advance payments would be admissible to vary the terms of the written contracts. On the latter point, we believe that El Salto's position founders. The New York parol evidence rule provides:

"Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement . .." New York U.C.C. § 2-202.

El Salto...