Trans-Orient Marine v. Star Trading & Marine

• Decision Date: 01 March 1990
• Docket Number: No. 86 Civ. 5823 (WCC).,86 Civ. 5823 (WCC).
• Citation: 731 F. Supp. 619
• Parties: TRANS-ORIENT MARINE CORP., Plaintiff, v. STAR TRADING & MARINE, INC. and the Republic of the Sudan, Defendants.
• Court: U.S. District Court — Southern District of New York

731 F. Supp. 619

TRANS-ORIENT MARINE CORP., Plaintiff, v. STAR TRADING & MARINE, INC. and the Republic of the Sudan, Defendants.

No. 86 Civ. 5823 (WCC).

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

March 1, 1990.

Walker & Corsa, New York City, for plaintiff; Kirk M.H. Lyons, of counsel.

Odin, Feldman & Pittleman, P.C., Fairfax, Va.; Sally Ann Hostetler, Dexter S. Odin, of counsel, Kleinberg, Kaplan, Wolff & Cohen, P.C., New York City; Norris D. Wolff, of counsel, for defendants.

WILLIAM C. CONNER, District Judge:

Defendant Republic of the Sudan moves this Court to dismiss the complaint for failure to state a claim or for summary judgment. It claims that the new Republic of the Sudan, as successor state, is not liable for the alleged breach of a five-year exclusive agency contract entered into by the prior sovereign state of Sudan.¹ Defendant further asserts that a fundamental change in circumstances relieves it of any prior contractual obligations.

FACTS

Plaintiff's cause of action for breach of contract arises from an alleged five-year exclusive agency agreement to represent the Sudan in the United States P.L. 480 program.² The alleged October 14, 1983 agreement was effective from October 1, 1984 through September 30, 1989. In April 1985, a military coup deposed the then head of state, declaring a state of emergency and suspending the constitution. A twelve-month transitional military regime followed, which was then replaced by a civilian coalition government. The name of the state was changed from the Sudan to the Republic of Sudan. In June 1989, there was another military coup in which the present military regime overthrew the former civilian administration and suspended the constitution. See Africa: South of the Sahara 1990, Regional Surveys of the World (19th ed.) pgs. 953, 957, 959, 973 ("Africa: South of the Sahara 1990"). Both parties agree that the Republic of the Sudan is a foreign sovereign state.

On January 3 and 4, 1985, the then Sudanese government sent letters advising plaintiff that a new agent, CIDCO, had been appointed to handle the contracts under P.L. 480 and that CIDCO would select the shipping agent. This alleged termination of the then-executory contract did not provide the one-year termination notice required under the original contract. Since January 1985, the Sudan has awarded CIDCO a continuing series of contracts to handle the wheat and wheat flour transportation under P.L. 480, in alleged violation of plaintiff's exclusive agency contract. No additional facts are relevant to the present motion.

DISCUSSION

The present Sudanese government asserts that it is not liable for the contractual obligations of the prior sovereign, pointing to the two military coups of 1985 and 1989 to sustain its position that both the 1985 military regime and the present administration are successor states and that there has been a fundamental change in circumstances. Plaintiff contends that neither the 1985 regime nor the present regime is a successor state but that they represent mere changes in government which do not relieve the present regime from the prior government's contractual obligations. Plaintiff further argues that even if either regime is a successor state, they have ratified the prior government's contract. For the following reasons, summary judgment is denied.

A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact." Fed.R. Civ.P. 56(c); Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 11 (2d Cir.1986), cert. denied, 480 U.S. 932, 107 S.Ct. 1570, 94 L.Ed.2d 762 (1987); see Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "When the moving party has carried its burden under Rule 56(c), its opponent must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electrical Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). The non-moving party must establish that there is a "genuine issue for trial." Id. at 587, 106 S.Ct. at 1356. "In considering the motion, the court's responsibility is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried, while resolving ambiguities and drawing reasonable inferences against the moving party." Knight, 804 F.2d at 11. The inquiry under a motion for summary judgment is thus similar to that under a motion for a directed verdict: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2511-12, 91 L.Ed.2d 202 (1986).

Whether a new administration may terminate the executory portions of its predecessor's contracts is based on the succession of state theory. Restatement (Third) of Foreign Relations Law §§ 209, 210 ("Restatement"). International law sharply distinguishes the succession of state, which may create a discontinuity of statehood, from a succession of government, which leaves statehood unaffected. It is generally accepted that a change in government, regime or ideology has no effect on that state's international rights and obligations because the state continues to exist despite the change. Id. at § 208, Comment a. As stated by the Second Circuit Court in Lehigh Valley R. Co. v. State of Russia, 21 F.2d 396, 401 (2d Cir.), cert. denied, 275 U.S. 571, 48 S.Ct. 159, 72 L.Ed. 432 (1927):

A monarchy may be transformed into a republic, or a republic into a monarchy; absolute principles may be substituted for constitutional, or the reverse; but, though the government changes, the nation remains, with rights and obligations unimpaired.

However, where one sovereign succeeds another, and a new state is created, the rights and obligations of the successor state are affected. Restatement § 207. The rule with regard to contracts with private foreign individuals involves a balancing of competing interests. While the successor state is permitted to terminate existing contracts originally executed by the former sovereign and the private party, the successor state is liable to that party only for any amount due him as of the date of the change of sovereignty. Id. at § 209. But if the contract is totally executory, the successor state is released from the contract. See O'Connell, State Succession in Municipal Law and International Law, p. 298 (Cambridge 1967); Wilkinson, The American Doctrine of State Succession (Greenwood Press 1975).³

The Restatement of Foreign Relations Law describes a successor state to include:

a state that wholly absorbs another state, that takes over part of the territory of another state, that becomes independent of another state of which it had formed a part, or that arises because of the dismemberment of the state of which it had been a part.

Restatement § 208, Comment b. Careful study of defendant's submission reveals that the state of Sudan has not 1) wholly absorbed or been wholly absorbed by another state; 2) partly taken over or been partly taken over by another state; 3) become independent from another state of which it had formed a part; or 4) arisen out of dismemberment of a state of which it had been a part since the date of plaintiff's contract. Under the Restatement's definition, the state of Sudan has remained the same entity since its independence in 1956.

Defendant's own exhibit in support of its motion substantiates that only a change in government was effected by the two military coups:

Since achieving independence, the Sudan (renamed Sudan in 1975 and redesignated the Republic of the Sudan in December 1985, having been the `Democratic Republic' since May 1969) has had seven regimes: a civilian parliamentary government, which lasted until November 1958; a military regime, which, under General Ibrahim Abboud, continued in office until it was overthrown by a civilian coup in October 1964, a second civilian regime, which was then installed and lasted until May 1969, when the regime of Colonel (later Field Marshall) Gaafar Nimeri came to office, a 12-month transitional military regime, ushered in by the coup of April 1985, which deposed Nimeri; a civilian coalition government which followed the general election of April 1986; and the present military regime which overthrew the civilian administration on 30 June 1989 Emphasis added.

Africa, South of the Sahara 1990, p. 953 (Defendant's Exhibit A). Accordingly, the only changes in the Sudan since its independence in 1956 have been in the government, with seven distinct successive administrations. But there has been only one state.

Defendant unpersuasively emphasizes various aspects of the relevant transitions to reflect the creation of a new state: that the transitions resulted by way of military coups as opposed to routine, constitutional processes, the re-naming of the nation, the suspension of the constitution, the closing of the borders and the declaration of a state of emergency. Treatises, as well as applicable case law, demonstrate that such features do not effect a succession of state. In her treatise on International Law, Whiteman states:

There is also another old and fully recognized principal of general international law under which the identity of a state in international law is not effected by unconstitutional changes in government, whether brought about by revolution or coup d'etat. This rule is so unanimously recognized by writers since Grotius and Bynkershoek,

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