Waldron v. British Petroleum Co.

Decision Date23 June 1964
Citation231 F. Supp. 72
PartiesGerald B. WALDRON, individually and doing business as Consolidated Brokerage, Plaintiff, v. BRITISH PETROLEUM CO., Ltd., Cities Service Co., Socony Mobil Oil Co., Inc., Standard Oil Co. of California, Standard Oil Co. (New Jersey), Texaco Inc., Defendants.
CourtU.S. District Court — Southern District of New York

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Casey, Lane & Mittendorf, New York City, for plaintiff; Samuel M. Lane and Robert P. Beshar, New York City, of counsel.

Milton Pollack, New York City, for Defendant British Petroleum Co., Limited; Milton Pollack and Francis E. Koch, New York City, of counsel.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for Defendant Cities Service Co.; Simon H. Rifkind and Edward N. Costikyan, New York City, of counsel.

Donovan, Leisure, Newton & Irvine and Nixon, Mudge, Rose, Guthrie & Alexander, New York City, for defendant Socony Mobil Oil Co., Inc.; George Leisure, James M. MacNee, III, James R. Withrow, Jr., Goldthwaite H. Dorr and Robert R. Thornton, New York City, of counsel.

Cahill, Gordon, Reindel & Ohl, New York City, for defendant Standard Oil Co. of California; John F. Sonnett and William M. Sayre, New York City, of counsel.

Sullivan & Cromwell, New York City, for defendant Standard Oil Co. (New Jersey), Arthur H. Dean, Roy H. Steyer and E. Roger Frisch, New York City, of counsel.

James O. Sullivan and Paul B. Wells, New York City, for defendant Texaco Inc.

HERLANDS, District Judge:

PART I.*

The issues raised by defendants' motion to dismiss plaintiff's antitrust action and for summary judgment1 have such far-ranging implications that an extensive recital of the facts is unavoidably necessary.

Factual Background.

The controversy at bar originates out of the dispute between Great Britain and Iran over the nationalization of Iranian oil. In March and April of 1951, the Iranian Parliament, under the leadership of Dr. Mossadegh, enacted legislation which nationalized the oil industry and thereby abrogated a concession held by the Anglo-Iranian Oil Company (hereinafter "AIOC") pursuant to a 1933 agreement with the Iranian Government.2 Cmd. 8425, Explanatory Memorandum, pp. 3-4; Cmd. 8425, No. 1, pp. 9-19; Cmd. 8425, No. 10, pp. 29-31.3

The nationalization of the oil industry without provision for compensation to AIOC precipitated a serious international dispute between Iran and Great Britain. This eventually led to the severance of diplomatic relations between those two countries.

On May 18, 1951, the United States expressed deep concern about this dispute and urged the parties to solve the dispute through negotiation. State Dept. Bull., May 28, 1951, p. 851.

Thereafter, the United States made repeated attempts to effectuate a settlement.4

It was not until the fall of 1951 that plaintiff or any of his associates became interested in Iranian oil. In November of that year, Richard S. Nelson, who was at the time acting as an export manager for local firms in Denver, Colorado (Tr. 6478),5 received a letter from James A. Raphael, an Iranian resident, asking him whether he knew anyone who would be interested in bartering sugar for oil. Tr. 6504.

Nelson, who had experience neither in the food nor oil businesses, approached plaintiff Waldron in the hope that Waldron would have some connections in the food industry. Tr. 6506-6507.

Nelson and Waldron soon found it impracticable to effectuate such a barter. Instead, they became interested in the direct sale of oil.6

Some preliminary efforts were made to locate purchasers for the oil. Tr. 6605-6619. Much correspondence was exchanged with Raphael about purchasing the oil from Iran and transporting it to this country. See SONJ Exs. 15, 27A, 29, 71 for id.

Waldron and Nelson were aware of the delicate international problems posed by the Anglo-Iranian dispute. On January 28, 1952, Waldron wrote to United States Senator Johnson of Colorado to ascertain the attitude of the State Department with respect to the sale of Iranian oil in this country. SONJ Ex. W-115 for id.

Approximately one week later, Senator Johnson forwarded to Waldron, without comment, the reply of the State Department which, in relevant part, was as follows:

"In the Department's opinion the British-Iranian oil controversy is basically a matter for negotiation between the two Governments directly concerned. Because of our vital interest in this matter the United States Government continues to use its influence toward finding a solution of this difficult problem. In line therewith, we welcome the initiative of the International Bank for Reconstruction and Development which is currently trying to work out a plan for settlement of the controversy and are extending every appropriate assistance in such efforts as the Bank is making in this regard.
"The Department is of the opinion that the injection of any non-official individual, group or organization into this dispute might prejudice the ability of the parties concerned in reaching a satisfactory solution. Accordingly, the Department believes that non-official entities should refrain from getting involved in the dispute." SONJ Ex. 3 for id.

Knowledge of the State Department's attitude toward the Iranian problem in no way dissuaded the efforts of plaintiff to procure a contract for the sale of Iranian oil.7 On February 13, 1952, Nelson sent a coded cablegram to Raphael containing the admittedly false information that he had cash purchasers for two million tons of oil. SONJ Ex. 37 for id.8

On February 19, 1952, Raphael communicated this false information to Dr. Abuzia, the authorized foreign sales representative for the National Iranian Oil Company (hereinafter "NIOC"). SONJ Ex. 39 for id.

At the time that these false representations were being passed on to Iranian officials, representatives of the World Bank were in Tehran attempting to work out a solution to the Anglo-Iranian dispute. International Bank for Reconstruction and Development Press Release No. 285, April 3, 1952, p. 6.9

From this point forward and continuing until the time that the contract was actually negotiated, the Waldron group and Raphael engaged in a correspondence that contained patent misrepresentations and none-too-subtle hints of bribery.

Shortly after receiving the false information about the interested oil purchasers, NIOC (which was the Iranian Government instrumentality responsible for operating the nationalized oil industry) indicated to Raphael that it was interested in a more extensive deal encompassing a five-year contract for fourteen million tons of oil.

Raphael drafted an outline of such a contract and sent one copy to NIOC and the other to Nelson. See SONJ Exs. 8, 9, 40 for id.

On March 3, 1952, Nelson cabled Raphael the false information that the five-year, fourteen million-ton oil contract was acceptable to his "principals." SONJ Ex. B-1045 for id.10

When the World Bank's mission returned to Iran from London on March 5, "New complexities * * * developed in regard to an Iranian proposal that Iran should have an option to sell directly on world markets substantial quantities of crude oil and products." International Bank for Reconstruction and Development Press Release No. 285, April 3, 1952, p. 8.11

Several days after he had cabled Raphael in regard to the five-year contract, Nelson received a letter which injected a new and seemingly corruptive force into the negotiations. Raphael wrote Nelson to "Explain to your friend that you'll have to spend about one per mille sic to the persons who will assist us to realize signing this contract. You know Dick, in Iran for getting such a tremendous contract under way, one should pay left and right to the officials who will have some say in the matter." SONJ Ex. 4 for id.

Thereafter, the correspondence continued in the same malodorous manner. On March 31, April 4 and April 8, 1952, additional false information was sent to Raphael. SONJ Exs. 64, 67 for id; see SONJ Ex. 13 for id.12

On April 16 and May 1, 1952, Raphael reminded Nelson about the necessity of bringing enough money to meet the expenses referred to in his previous correspondence. SONJ Exs. 13, 83 for id.

At this point, the Waldron group decided that the time had come for Waldron and Nelson to fly to Iran and consummate the contract. After discussing the situation among themselves, the Waldron group decided that the term "oil" should be omitted in plaintiff's and Nelson's passport applications. Tr. 1114. The relevant portion of their letters to the State Department's Passport Agency read:

"My trip is for both business and pleasure, and I expect to visit several countries in Europe, as well as the Middle East. The business portion of my trip will be primarily concerned with making connections for obtaining sources of raw materials."

SONJ Exs. B-108, B-109 for id.

Waldron claims that, upon arrival in Iran, he and Nelson told Raphael that there was to be no bribery involved in procuring the contract. Tr. 699. However, they advised Raphael not to tell anyone about their interest in oil. Consequently, in responding to an inquiry from an official of the American Embassy, Raphael falsely replied that Waldron and Nelson "were there on other business than oil." Tr. 1108-09.

Finally, on May 25, 1952, Waldron and Nelson obtained the highly desired contract.13

Upon their return to the United States, they informed Senator Johnson and the State Department of their activities. They stated that they believed their action to "be for the best interests of the United States, Iran and the entire Western world." SONJ Exs. N-113, W-114 for id.

Starting in June of 1952, plaintiff and his associates (which by this time included James E. Zoes, who had been brought into the group while Nelson and plaintiff were in Iran) made serious efforts to both implement and assign the contract. Zoes began to investigate the possibility of buying or renting tankers. Tr. 9109-11.14

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