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Eastern States Petroleum Co. v. Asiatic Petroleum Corp.

April 10, 1939

EASTERN STATES PETROLEUM CO., INC.,
v.
ASIATIC PETROLEUM CORPORATION ET AL.



Appeal from the District Court of the United States for the Southern District of New York.

Author: Chase

Before L. HAND, AUGUSTUS N. HAND, and CHASE, Circuit Judges.

CHASE, Circuit Judge.

This appeal is form an order granting a motion for an injunction pendente lite in an action to recover treble damages for the alleged violation of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq., and the Clayton Act (38 Stat. 730). 15 U.S.C.A. § 15. The injunction, which was sought and granted under the provisions of 15 U.S.C.A. § 26, prohibited the appellants from interfering with the performance of contracts made by the plaintiff respecting the sale, transportation or delivery of products dealt in by the plaintiff and from using threats, commands, force or coercion to prevent others from purchasing plaintiff's products. The breadth of the general restraining language of the injunction was narrowed, however, so as to permit "(1) the bringing of suit by Mexican Eagle Oil Company or any assignee to recover the oil, or the value thereof or damages for the retention thereof, heretofore or hereafter shipped to the plaintiff from the Republic of Mexico, or (2) to advertise the fact of the pendency of such litigation, or (3) bring such fact to the attention of the trade in general or any person in it, or (4) to appeal from assistance or redress to governmental bodies".

The plaintiff is a delaware corporation engaged in the purchase and sale of refined petroleum products and also in refining those products from crude oil at its refinery in Houston, Texas. Its principal office is in the Southern District of New York. Appellant Wilkinson is the president of appellant Asiatic Petroleum Corporation, a Delaware corporation, and of Anglo-Mexican Petroleum Corporation, a New York corporation. The principal office of each of these corporations is in the Southern District of New York. Both of these corporations form part of a large number of corporations which are controlled directly or indirectly by what will here be called the Shell Group, the control of which is traceable to what is known as the Royal Dutch Company, a corporation organized under the laws of the Kingdom of the Netherlands and Shell Transport & Trading Co., Ltd., a British corporation. The defendants who were not enjoined and have not appealed are the Shell Union Oil Corporation, a member of the Shell Group and Boyce Coppinger of the Asiatic Petroleum Corporation. The Shell Group is engaged extensively, both in this country and abroad, in business which includes the purchase, sale and refining of crude petroleum and the purchase and sale of various products refined and manufactured from crude petroleum in competition with the business of the plaintiff.

This controversy has grown out of the situation in the above mentioned business which has been created by the seizure by the Republic of Mexico, on March 18 1938, of various oil wells in Mexico which were then owned by the Mexican Eagle Oil Company, Ltd., a corporation also a member of the Shell Group which will be herein called Mexican Eagle.

It is undisputed that on the above date the President of Mexico issued a decree, without action by the Mexican Congress, under which the property of Mexican Eagle was expropriated without compensation and seized by the government. The property of Mexican Eagle so seized which is of present concern consisted of fourteen out of a total of eighteen oil wells in the Poza Rica oil field and pipe lines from that field to the Mexican port of Tuxpam. The other four wells then were, and since have been, owned by Petromex Corporation which is owned by the Mexican Government. Since the seizure under the decree of expropriation, the wells in the Poza Rica field have all been producing. The crude oil from all the wells in the field has been commingled and piped to Tuxpam through the seized pipe lines to be shipped from that port.

The plaintiff, finding it difficult to secure an adequate supply of domestic crude oil at favorable prices for its refinery at Houston, made a contract on August 11, 1938, with a corporation wholly owned by the Mexican Government, here called Distribuidora, for a supply of crude oil. This crude oil has been shipped from Tuxpam out of oil from the Poza rica field produced from all the wells there and commingled. The total amount shipped under the contract to the plaintiff has not exceeded the amount produced by the wells owned by Petromex before March 18, 1938, and the plaintiff therefore claims that none of the oil from the expropriated wells of Mexican Eagle has been delivered to it but it is doubtful whether such a position is tenable because of the indiscriminate commingling of all of the oil from all of the wells in the field.

The plaintiff has refined the crude oil thus obtained and used the refined products in its export trade. Among the contracts which have been filled in part, at least, out of such refined products is one made by the plaintiff on November 18, 1937, with Harris & Dixon, Ltd., a British corporation, for the sale of some 120,000 tons of refined products to be delivered in installments between February 1, 1938, and January 31, 1940. The conduct of the defendants in respect to the Harris & Dixon contract is what the district judge relied on as sufficient to entitle the plaintiff to the temporary injunction. This was brought about in the following manner:

It was generally known that Mexican Eagle claimed that its property had been unlawfully seized in Mexico and that the so-called Shell Group objected to the purchase of oil from expropriated wells. In October, 1938, a Mr. van Zonneveld, a director of Harris & Dixon, Ltd., learned in London that the "Stigstad", the steamer which had been chartered to make deliveries of the products under the plaintiff's contract with Harris & Dixon, Ltd., was being watched and that Mexican Eagle might cause her cargo to be seized upon arrival in England. He communicated at once with the British Ministry of Mines and was informed that there were threats by "other quarters" to seize any refined products produced from Mexican oil. He was also told that it was not contrary to British law to import such products and the suggestion was made that he confer with representatives of the Shell Group. By this time Mr. van Zonneveld knew that the British Government did not view with favor the importation of products refined from Mexican oil but that it would not prevent importation. He adopted the suggestion of the Ministry of Mines and had a conference with Mr. Godber of Mexican Eagle on November 4, 1938. He was then told that Mexican Eagle claimed that its crude oil was being used for refining to make the products being delivered to Harris & Dixon, Ltd., under the contract it had with the plaintiff and that the Shell Group intended to seize such cargoes. Mr. van Zonneveld then told Mr. Godber that he was going to New York to find a solution if possible and Mr. Godber replied that if he had occasion "to talk with the Mexican Eagle to go and see Mr. Wilkinson" in New York and gave him Mr. Wilkinson's address there.

Mr. van Zonneveld did go to New York, arriving there on November 10, 1938, and consulted a Mr. Leach of the New York British Consulate who advised him to see Mr. Wilkinson. He later consulted with representatives of the plaintiff and told them that Mr. Leach had been to Washington "to put before the Embassy our very unhappy and very unpleasant situation, and that he could only bring back the answer that the British Government did not like Mexican oil to enter Great Britain and I was asked if I could possibly find a solution so that no more of that oil was going to come in." He also told representatives of the plaintiff that Mr. Leach had suggested that information as to the amount for which the plaintiff would cancel the contract should be obtained. In response to that he was told that it would be $500,000 plus release from their charter. He then reported back to Mr. Leach, who arranged an appointment for him with Mr. Wilkinson for the morning of November 16th.

He then reluctantly called upon Mr. Wilkinson and was informed by him that he was absolutely certain that the plaintiff was handling Mexican Eagle oil, "that it was physically impossible for the Mexican Government to deliver oil in the quantities that they did from their own wells and from their own property, and that the whole world knew quite well that the Eastern States were taking expropriated oils." Mr. van Zonneveld inquired whether, "if we defaulted would they pay the piper, or pay the damages, to hich he said definitely no." He told Mr. Wilkinson the amount of probable damages if Harris & Dixon defaulted and Wilkinson said he was not interested but did say that "they could not fight all the battles in the world and that we, as a British firm, should be on the same side of the fence as they were, even from a moral point of view". After asking why the Shell Group would wait to seize the products in Great Britian instead of doing so in the United States and being told that British laws were considered more favorable, Mr. van Zonneveld left.

During the interview, the position of Mr. Wilkinson was one of insistence that the plaintiff was shipping under the Harris & Dixon contract products made from crude oil owned by Mexican Eagle; that such cargoes would be seized; that Harris & Dixon ought not to be a party to such business; but that the latter could not expect to be indemnified if it defaulted on its contract and was left to do as it thought best in view of the attitude of the Shell Group and the British Government.

The next interview Mr. van Zonneveld had with one who spoke for the defendants was in New York on November 24th. It was with Mr. Boyle who was the head of the legal department of the Shell Group in London. Mr. van Zonneveld then went to the office of the Mexican Eagle to tell Mr. Wilkinson "that we were just going ahead, that we had decided to open up credits and take the cargo". As Mr. Wilkinson was away he saw Mr. Boyle instead. He had in the meanwhile consulted again with Mr. Leach; with representatives of the plaintiff; and had communicated with his own firm in London. As that was the first time Mr. van Zonneveld had seen Mr. Boyle, he explained the situation fully to him and expressed concern about the possibility of the seizure of cargoes and asked if there was any way to protect Harris & Dixon "because they really had nothing to do with the whole issue". Mr. Boyle said it certainly was unfortunate but that they would take no steps so far as Harris & Dixon were concerned. Then van Zonneveld urged Boyle to consider the innocent party position of Harris & Dixon who had made the contract before any ...


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