UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
February 16, 1970
Civello Giuseppina NOTO, etc., et al., Plaintiffs,
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.
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,
two in four,
and five in one only.
However, of the twenty-three named defendants, seven, including the shipowner and the operator of the loading facilities, were never served with process,
and one still has time to answer.
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.
The remaining thirteen defendants,
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.
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.
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.
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.
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";
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."
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.
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.
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.
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."
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 respect to the British Petroleum subsidiaries. And so, too, there is not the slightest basis for any contention that IOEP, IOP or any British Petroleum subsidiary was used by the defendants as a sham or decoy or a conduit to defraud or defeat the rights of third parties.
Upon the facts here presented, Iranian, Dutch or Italian law would govern on the issue of whether the corporate veil may be pierced and the Consortium members held individually liable.
The opinions of legal experts, unchallenged by plaintiffs, and the foreign legal material
leave no room to doubt that under any of the aforesaid foreign laws, whichever may be applicable by choice of law principles, IOEP's corporate entity would be respected, as would that of the British Petroleum subsidiaries - in sum, that plaintiffs' claims for the alleged tort liability can only be asserted against those corporate entities, and that their stockholders, direct or indirect, are (absent circumstances not here present) exempt from personal liability for those claims.
The plaintiffs advance theories; the Court decides upon facts.
Where, as here, the solvency of the subsidiaries is unquestioned, where the outward indicia of the corporate form have been carefully maintained, and where the corporate form has not been used to defraud, there is no equitable reason whatsoever to pierce the corporate veil.
To do so would do violence to the concept of separate corporate identity and the stockholder relationship which the law recognizes "for the very purpose of escaping personal liability."
Since affidavits have been submitted on the motions to dismiss for failure to state a claim, they are treated as motions for summary judgment under Rule 56 and are granted.
II. The motion to dismiss for forum non conveniens.
And even if plaintiffs' complaints were sufficient to withstand the motion to dismiss for failure to state a claim, the defendants are entitled to dismissal upon the ground of forum non conveniens.
The factors favoring refusal of jurisdiction under that doctrine are overwhelming. Except for the circumstance that the attorneys of record for the plaintiffs maintain their offices in this district, normally a factor of little significance
- and even of less significance in this case
- not a single contact within this district justifies the filing of these lawsuits here. As already noted, the LUISA disaster occurred in Iran; the plaintiffs are all Italian nationals and residents, as were the decedent crew members; the ship herself was of Italian registry and ownership. The operator of the oil loading facilities (IOEP), the shipowner (Cosarma), the time charterer (BP Tanker), the owner of the title to the oil immediately prior to the loading (Oil Trading), and the transferee of title upon loading (BP Trading), all not subject to service of process, are not before the Court. Witnesses to the explosion, said to number more than forty, and records pertaining to the disaster are all either in Iran or Italy and available only there. Every source of evidence, whether pertaining to the issue of negligence or to the alleged individual liability of the defendants as indirect stockholders, is in a foreign land. Under the choice of law standards applied by our courts to maritime claims, whether jurisdiction is in admiralty or diversity, foreign law, either Italian or Iranian, would be applied to determine the substantive rights of plaintiffs.
If the case were retained here, our courts would be called upon to resolve complex issues of foreign law.
Despite these overwhelming factors, which strongly support refusal of jurisdiction, plaintiffs contend that dismissal of these suits is foreclosed, since the doctrine of forum non conveniens "presupposes at least two forums in which the defendant is amenable to process; [it] furnishes criteria for choice between them."
They argue that none of the defendants here is amenable to process in an obviously more convenient foreign forum; nor has any defendant agreed to submit to such foreign jurisdiction. In sum, plaintiffs contend that upon this ground alone the Court is without discretion in the matter and lacks power to decline to entertain jurisdiction. This Court does not agree.
Essentially, the discretion which the Court is called upon to exercise under the doctrine, which had its birth in admiralty and later was extended to other causes under federal jurisdiction, invokes the Court's inherent power to decline jurisdiction "in the interest of justice."
The Court does not act in a vacuum, but upon a realistic appraisal of facts in exercising its discretion. It is true that in Gulf Oil Corp. v. Gilbert and its progeny and predecessors the Supreme Court reviewed cases where the courts had exercised discretion in accepting or declining jurisdiction where defendants were subject to process and jurisdiction in other forums, but it is also clear that the discretion was exercised with respect to defendants against whomm upon its face a meritorious claim was alleged. The cases did not involve defendants against whom, as in this instance, palpably specious and legally baseless claims are asserted.
Inquiry by the Court as to the integrity of the alleged claims is not foreclosed; indeed, the Court's power of inquiry exists no less here than in instances of colorable assignments given to avoid limitations upon jurisdiction; such evasions may be disregarded.
Otherwise a plaintiff, by the simple device of naming a defendant against whom not even a colorable claim is alleged and who is not subject to process and jurisdiction in another forum, could effectively prevent consideration by the Court of the doctrine of forum non conveniens. The Supreme Court itself, in Gulf Oil Corp v. Gilbert,
"This Court, in one form of words or another, has repeatedly recognized the existence of the power to decline jurisdiction in exceptional circumstances. As formulated by Mr. Justice Brandeis, the rule is:
'Obviously, the proposition that a court having jurisdiction must exercise it, is not universally true; else the admiralty court could never decline jurisdiction on the ground that the litigation is between foreigners. Nor is it true of courts administering other systems of our law. Courts of equity and of law also occasionally decline, in the interest of justice, to exercise jurisdiction, where the suit is between aliens or non-residents or where for kindred reasons the litigation can more appropriately be conducted in a foreign tribunal.' Canada Malting Co., Ltd. v. Paterson Steamships, Ltd., 285 U.S. 413, 422-423 [52 S. Ct. 413, 415, 76 L. Ed. 837]."
The plaintiffs' asserted claims have no relationship to or contact with this district, or for that matter with any jurisdiction in the United States. The hard, realistic fact is that the basic controversy is one between foreign plaintiffs on the one side and foreign corporations, IOEP, Cosarma and BP Tanker, on the other. The doctrine of forum non conveniens protects not only the immediate defendant from harassing and vexatious litigation, but also other litigants and the community at large from unwarranted imposition upon the local courts' jurisdiction.
"Factors of public interest also have place in applying the doctrine. Administrative difficulties follow for courts when litigation is piled up in congested centers instead of being handled at its origin. Jury duty is a burden that ought not to be imposed upon the people of a community which has no relation to the litigation."
These cases, which present legal and factual issues of substantial complexity, have already delayed and would necessarily delay still further other litigants whose right to our judicial process is unquestioned.
An additional consideration supports dismissal of these actions. The Court must be concerned with and cannot disregard another aspect of the matter
- how it came about that these suits were commenced in a court of the United States in "a community which has no relation to the litigation." This Court's study of the voluminous papers and briefs submitted on these motions revealed that in April 1968, prior to the filing of these actions, letters had been sent by an out-of-state attorney
to the families of the disaster victims.
The letters were accompanied by a "CONTINGENT FEE AGREEMENT" to be signed by the addressee. The Court sought further information from the attorneys with respect to the matter, and what was submitted obscured rather than clarified the circumstances of the retention of the out-of-state attorney, who in turn retained local counsel. The Court then directed that all persons having knowledge of the facts appear at a hearing. While local counsel of record attended and participated in the hearing, the out-of-state attorney failed to appear, but sent a long, rambling document containing many self-serving statements. But it also contained sufficient to indicate blatant solicitation by him of retainers from the plaintiffs herein
which transcended ethical standards,
if not statutory prohibitions.
The courts would be derelict if they supinely stood by, aware that improper practices had flooded their dockets with litigation that truly belongs in another forum. The courts have "inherent power to protect [themselves] from a deluge of litigation by nonresidents, inspired by contingent retainers to avoid or overcome foreign laws and interpretation and application thereof by foreign courts * * *."
Thus, the circumstances which led to the retention of plaintiffs' lawyers in this district and the consequent filing of the actions here give added reason for declining jurisdiction.
Finally, to decline jurisdiction in these actions deprives plaintiffs of no rights. Their claims can be litigated upon the merits in Italy, their own country, since a five-year statute of limitations applies.
Cosarma, a corporation of Italy, is subject to jurisdiction there if plaintiffs decide to sue. Additionally, the active alleged tortfeasors, Cosarma, IOEP, NIOC and BP Tanker, are engaged in litigation before the Tribunal of Rome, wherein each seeks to cast liability upon another for the LUISA disaster. Since plaintiffs' claims are based upon the tortious acts that are the subject of that litigation, under Italian law they may intervene and thus acquire jurisdiction over the non-Italian corporations. Plaintiffs are also in a position to assert their claims against Cosarma in an action commenced against them by the latter in the Tribunal of Venice for a declaratory judgment that it is not liable to them.
Moreover, whether plaintiffs file separate suits, intervene in the Tribunal of Rome litigation, or assert their claims in the declaratory judgment action, they will have the immense advantage of the testimony of all witnesses who reside either in Iran or Italy and of the massive documentary material which Cosarma, IOEP, NIOC and BP Tanker, as opposing forces, must necessarily offer to sustain their conflicting contentions as to who bears responsibility for the disaster. Plaintiffs would be in a position to present a far stronger evidential case to support their claims than if the trials were permitted here, where, in addition to complex choice of law issues, they would also have the heavy burden of difficult problems of proof. In Italy they would also have available the findings of fact made by the Genoa Board of Inquiry especially convened to inquire into the causes of the disaster, which, under Italian law, constitute prima facie evidence in all actions arising out of the disaster;
in fact, the Tribunal of Rome has already ordered they be made part of the pending proceedings before it. In sum, the conclusion is compelled that not only are plaintiffs deprived of no right by remitting them to their home forum, but that justice would be more readily achieved there.
In light of the disposition made herein, it is unnecessary to pass upon the defendants' further claim that these actions are barred under applicable statutes of limitations.