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NOTO v. CIA

February 16, 1970

Civello Giuseppina NOTO, etc., et al., Plaintiffs,
v.
CIA SECULA di ARMANENTO et al., Defendants. Giuseppa MARINO, etc., et al., Plaintiffs, v. CIA SECULA di ARMANENTO et al., Defendants. Alberto ALBERTANI, etc., Plaintiff, v. CIA SECULA di ARMANENTO et al., Defendants. Loreta di Fazio D'AGNESE, etc., Plaintiff, v. CIA SECULA di ARMANENTO et al., Defendants. Giuseppe MIGLIORINO et al., Plaintiffs, v. GOVERNMENT OF IRAN et al., Defendants


Edward Weinfeld, District Judge.


The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, District Judge.

On June 5, 1965, the Italian-owned oil tanker LUISA exploded and was destroyed by fire while loading crude oil at the port of Bandar Mah Shahr (then known as Bandar Mashur), Iran. Thirty-one of the tanker's crew of forty-one perished in the disaster. These are five actions brought on behalf of the next of kin of twenty-eight deceased crew members and by seven injured survivors. All the plaintiffs are nationals and residents of Italy, as were the deceased crew members. The dependents of the deceased crewmen and the surviving crew members have been paid indemnities or are receiving pensions to which they are entitled under Italian law. The claims here asserted are for a maritime tort in the territorial waters of Iran.

 The LUISA was of Italian registry and was owned by an Italian corporation, Cia Secula di Armanento (Cosarma), which was the sole employer of her crew. At the time of the disaster the LUISA was under time charter to BP Tanker Company Ltd. (BP Tanker), a subsidiary of The British Petroleum Company Limited (British Petroleum). The oil being loaded aboard the vessel at the time of the disaster had previously been acquired by Oil Trading Company (Iran) Ltd. (Oil Trading) at the wellhead from where it had been transported to the pier. Oil Trading sold the oil and passed title thereto at the ship's rail to BP Trading Company Limited (BP Trading). Both Oil Trading and BP Trading are also subsidiaries of British Petroleum.

 The oil terminal and loading facilities were under the exclusive operation and control of the Iranian Oil Exploration and Producing Company (IOEP), a Dutch corporation with its principal office in Iran. IOEP in turn was the wholly owned subsidiary of Iranian Oil Participants Ltd. (IOP), a British corporation. IOP shares were and are held directly or indirectly by many of the world's major oil companies, members of the "Iranian Oil Consortium of 1954," of which more hereafter. The reversionary interest in the terminal and loading facilities at Bandar Mah Shahr was vested in the National Iranian Oil Company (NIOC), an Iranian corporation, owned by the Iranian government. *fn1"

 The defendants named in these actions are domestic corporations, foreign corporations of Britain, the Netherlands, France, Italy and Iran, and the Government of Iran. In all, twenty-three defendants are named in the five complaints. Of these, sixteen are named in all five actions, *fn2" two in four, *fn3" and five in one only. *fn4" However, of the twenty-three named defendants, seven, including the shipowner and the operator of the loading facilities, were never served with process, *fn5" and one still has time to answer. *fn6" The claims against two defendants, Dowd Shipping, Inc. and Tidewater Oil Company, are so patently frivolous that their motions for summary judgment may be granted without further discussion. *fn7"

 The remaining thirteen defendants, *fn8" all major oil companies, move to dismiss the complaints on the grounds that (1) under controlling principles of applicable foreign law they fail to state a claim upon which relief can be granted; and (2) this district is forum non conveniens. In addition, several defendants move to dismiss on the ground that the actions are barred by the statute of limitations, and a number dispute jurisdiction over them. *fn9"

 1. Failure to state a claim under controlling foreign law.

 To place the matter in proper focus, it should be observed that upon this record there can be no dispute that IOEP at the time of the disaster had control and the sole responsibility for the operation and maintenance of the oil terminal and loading facilities, and was then engaged in the loading operation together with the crew and personnel of the LUISA. The only others at the scene who may be said to be involved in the disaster were Oil Trading, the owner of the crude oil at the time of its delivery to the LUISA; BP Trading, the purchaser of the oil from Oil Trading; and BP Tanker, the time charterer of the LUISA. All of these, whatever their participation in the tragic event, have not been named as defendants or, if named, have not been served.

 Equally, there is no dispute that none of the remaining oil company defendants in this action had any direct role in, or in any way was connected with or responsible for, the purchase, sale, loading or transportation of the oil loaded or intended to be loaded aboard the LUISA, or was involved with the operation or maintenance of the port facility. Nonetheless, the plaintiffs seek to hold the defendants liable for the disaster. They rely upon the defendants' membership in the Iranian Oil Consortium of 1954 created in that year by agreement with the Imperial Government of Iran (Agreement) to continue for a term of twentyfive years. The Agreement sets forth detailed procedures for the production, refinement and marketing of Iranian oil by the Government of Iran and the foreign member corporations. The Consortium members do not themselves operate the oil producing and refining facilities in Iran. Those functions are performed by two "Operating Companies," IOEP, already mentioned, and Iranian Oil Refining Company (IOR), both incorporated under the laws of the Netherlands, but with their principal offices in Iran. *fn10" IOEP explores for and produces crude oil and also natural gas; IOR refines crude oil produced by IOEP. Each Consortium member has the right to transfer all or part of its interest in the Consortium and also to incorporate subsidiary "Trading Companies" to purchase oil from NIOC for export from Iran. Any transferee or Trading Company becomes a party to the Agreement and is bound by its terms. *fn11"

 IOP, a British corporation with offices in London, owns all the stock of IOEP and also of IOR. The original Agreement did not provide for IOP, which was later set up by the Consortium members, each receiving the percentage of IOP stock proportionate to its interest in the Consortium. At the time of the LUISA disaster, each remaining defendant herein, as a Consortium member, either directly or indirectly through a subsidiary, was a stockholder in IOP. Thus the sole connection of each remaining defendant with the catastrophe was as an indirect stockholder of IOEP, except that British Petroleum's alleged connection also arises through BP Tanker, Oil Trading and BP Trading, its subsidiaries.

 The plaintiffs seek to hurdle the well-defined corporate structure of the Consortium and to hold the defendants herein liable for the tort claims upon the ground that as Consortium members they shared responsibility for the alleged failure of IOEP to supervise properly the piers and docks at the port of Bandar Mah Shahr and for permitting the improper loading of the oil aboard the LUISA; according to plaintiffs, each defendant as a Consortium member was a joint tortfeasor with IOEP. What plaintiffs seek to do is, first, to pierce the corporate veil of IOEP; next, that of IOP; then, to bypass the subsidiary corporations through which most defendants own their shares in IOP; and thus finally to reach the parent corporations, the Consortium members. *fn12" To achieve this result, which would disregard the doctrine of stockholder immunity from corporate obligation so firmly entrenched in our legal and economic system, plaintiffs must offer substantial reasons.

 Although plaintiffs' contentions are not clearly articulated, and at times even contradictory, they suggest two grounds on which it is urged that Consortium members can be reached: (1) that New York law governs in defining the relationship of the parties under the 1954 Agreement, and that under applicable New York principles the Corsortium members were engaged in a joint venture which imposed upon each liability for the torts committed in furtherance of the venture; and (2) that IOEP was the "alter ego" of the Consortium members and their agent in the management of the docks and loading facilities at Bandar Mah Shahr. With respect to British Petroleum, it is also contended that its subsidiaries, BP Tanker, Oil Trading and BP Trading, were similarly its "alter egos" and agents.

 Plaintiffs base their argument that New York law determines the status of the signatories to the Agreement on the contention that it was consummated in New York, where a number of United States oil companies executed the Agreement - "the last act necessary to give [it] binding effect"; *fn13" further, they argue that "[the] contract in question, the Consortium Agreement, invokes by its very terms the provisions of United States and New York law." *fn14" These contentions not only misstate the terms of the Agreement, but also the fact as to its consummation. The Agreement, by its very terms, was not to become effective until approved by the Iranian Government. *fn15" Both Houses of the Iranian Parliament passed the required legislation and then the Royal Decree making it effective was issued in Iran, subsequent to the signing of the Agreement by the Consortium members, including those who signed in New York. *fn16" Moreover, plaintiffs' averment that the Agreement invokes "by its very terms the provisions of United States and New York law" is upon its face also specious. *fn17" But even were plaintiffs' position sound, New York law is clear that a joint venture cannot be conducted through a corporation. "[The] rule is well settled that a joint venture may not be carried on by individuals through a corporate form. [citations omitted] The two forms of business are mutually exclusive, each governed by a separate body of law." *fn18"

 Plaintiffs' further contention that the corporate identities of IOEP, the other subsidiaries and the British Petroleum subsidiaries should be disregarded because they are the "alter egos" and agents of their parent corporations is equally groundless. The undisputed fact is that IOEP is a solvent and substantial corporation with net assets of over 200 million dollars; it operated, maintained and controlled the port facility entirely independently of IOP, its parent, and of IOP's direct or indirect shareholders. It functioned as a separate corporate unit, as it was set up to function under the Agreement. Stock ownership by itself is insufficient to charge a parent company for the torts of its subsidiary. Except for the unsupported allegation in the complaint and unsubstantiated statements of plaintiffs' counsel, not a single evidentiary fact has been submitted to suggest that the defendants here, except for their stock interest in IOP, played the slightest role in directing or controlling the operations or functions of IOEP, and the same is true with ...


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