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FIRST NATL. BANK OF ARIZONA v. BP

March 25, 1971

First National Bank Of Arizona, as successor executor of the last will and testament of Gerald B. Waldron, Deceased, Plaintiff
v.
British Petroleum Co., Ltd., Socony Mobil Oil Co., Inc., Standard Oil Co. of California, Standard Oil Co. (New Jersey) and Texaco, Inc., Defendants


Croake, D. J.


The opinion of the court was delivered by: CROAKE

CROAKE, D. J.:

The motions in this case now before the court provide a study in the complications often attendant upon private antitrust litigation. Indeed, it is not an easy matter to determine exactly what the present posture of this case is.

 The following is a recitation of the relevant facts, as compiled by this court from examination of the depositions and affidavits, and as abstracted from the decisions of other judges previously involved in this case. *fn1"

 In March and April of 1951 Iran nationalized its oil industry, thereby abrogating the concessions held by the Anglo-Iranian Oil Company (now British Petroleum). The resulting shutdown of the then world's largest refinery deprived Iran of its largest source of income, and led to United States fears of a Communist coup d'etat and to severance of diplomatic relations between Iran and Great Britain.

 In November of 1951, Richard S. Nelson, an export manager for local firms in Denver, Colorado received a letter from an Iranian resident, James A. Raphael, asking whether he knew of anyone interested in bartering sugar for oil. Nelson approached Waldron, a broker of foods (not including sugar), then dealing primarily in dairy products in an adjoining office under the name of Consolidated Brokerage, with Raphael's proposition. When a barter of oil for sugar proved impracticable, the attention of Raphael, Nelson, and Waldron turned to a direct sale of oil. Waldron wrote Senator Johnson of Colorado to ascertain the attitude of the State Department to their involvement in such a sale. The reply was negative but not preclusive.

 Nelson cabled Raphael stating (falsely) that he had cash purchasers for 2 million tons of oil. Raphael communicated this information to the National Iranian Oil Company ("NIOC," an instrumentality of the Iranian Government), which responded by expressing interest in a more extensive deal encompassing 15 million tons of oil over 5 years. Nelson replied that this proposition was acceptable to his "principals." Raphael indicated the necessity for bribery of Iranian officials, although Waldron later contended that he had refused to be party to any bribes. Additional false information was sent Raphael.

 Eventually, Waldron and Nelson went to Iran. While there, they disclosed that they were not in the oil business and did not intend to sell the oil themselves, but nevertheless they obtained the "contract" which defendants now attack.

 On their return, they informed Senator Johnson of their activities, and various members of the group, which by this time consisted of Waldron, Nelson, James A. Bentley, a New York management consultant, and James E. Zoes, recruited while Waldron was in Iran (all inexperienced in oil dealings), attempted to implement or assign the contract. The possibility of buying or renting tankers was investigated. An offer to sell the oil to some of the larger oil companies was made and quickly rejected. The First National Oil Company of Long Island proved equally reluctant.

 Several meetings between the Waldron group and Cities Service produced an agreement whereby Waldron was to obtain an invitation for Cities' president, W. Alton Jones, to make an unpublicized visit to Iran, and in return the Waldron group was to receive one or two cents per barrel of oil run through the Iranian refinery, should Cities and the Iranian government successfully negotiate a management contract. The invitation was obtained, and Jones went to Iran and met with the Prime Minister of Iran. However, Jones may also have gone to Kuwait, without informing Waldron of the fact; in any event, Cities Service determined not to participate in the exploitation of Iranian oil resources.

 In December of 1952 NIOC extended the impending expiration date of the contract until June of 1953. Prior to that date, offers to Sun Oil and to the Richfield Oil Company (in which Cities had a substantial interest) were made; the offer to Sun had been rejected when the June deadline arrived; that to Richfield was rejected at a later date. Among other parties solicited, unsuccessfully, were the Nationalist Chinese, and, with regard to aviation gasoline, the United States Air Force.

 The present posture of the case presents three motions for determination. The first motion is by all defendants ("Defendants' 1970 motion"), and seeks summary judgment and dismissal on the ground that plaintiff *fn2" lacks business or property under Section 4 of the Clayton Anti-Trust Act of 1914 ("The Clayton Act"), 15 U.S.C. §§ 12-27, 15, which states:

 
Any person who shall be injured in his business or property by reason of anything forbidden in the anti-trust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee.

 The second motion is by defendant Texaco, Inc. ("Texaco's motion"), and seeks summary judgment in its favor for lack of a controverted issue of fact.

 The third is a cross-motion by plaintiff, seeking: (a) dismissal or denial of defendants' 1970 motion as barred by principles of "law of the case"; (b) denial or adjournment of Texaco's motion either because a fact issue exists, or because a determination would be premature until plaintiff has had an opportunity for discovery; (c) if motion "(a)" is denied, an adjournment for the purpose of ascertaining the applicable Iranian law, which adjournment defendants have stipulated to consent to, if the court should reach it; and (d) for a date by which defendants must answer or object to the interrogatories (119 pages) propounded by plaintiff on October 15, 1968.

 I

 Defendants' 1970 motion is unusual in that, after fifteen years of strenuous litigation, it now in essence revives their eight-year old challenge to plaintiff's standing. Plaintiff's response, which makes manifest the problems involved in the management of "big" cases, is, inter alia, that defendants' 1970 motion duplicates their motion, denied by the late Judge William B. Herlands of this court in 1964, and therefore is barred by principles of stare decisis and "law of the case."

 Defendants agree that the earlier motion in question was also grounded in an attack on plaintiff's standing, but contend that the present motion states additional facts and a different legal theory. They assert that the earlier motion was addressed to the argument that, irrespective of the nature or legal effect of the "contract" between plaintiff and NIOC, plaintiff's lack of experience or qualifications, and the unprincipled and illegal nature of his activities, precluded a finding that he possessed "business or property." They contend that the validity of the contract itself was not challenged as it is by their 1970 motion.

 Judge Herlands decided, in a learned and exhaustive opinion, dated June 23, 1964, and reported in 231 F. Supp. at 72-97, that under United States anti-trust law, while plaintiff did not possess "business," he did have "property" in the form of an option contract, *fn3" to which property the alleged acts of defendants had caused direct and primary injury. The Judge therefore concluded, interpreting the "business and property" clause to state two disjunctive tests, *fn4" that the plaintiff did in fact possess standing under Section 4 of the Clayton Act.

 It is not asserted that this court lacks the power to modify Judge Herlands' decision, under the rule of Dictograph Products Co. v. Sonotone Corp., 230 F.2d 131, 134 (2d Cir. 1956), nor is it argued that the decision, a landmark in anti-trust law, was in error in its analysis of Section 4 of the Clayton Act. Rather, the dispute focuses on conflicting interpretations of the scope of that decision, and on whether or not defendants have now introduced sufficient new facts or theories to warrant the exercise of this court's discretion by hearing their 1970 motion. This court is not, at the present time, being asked to determine the merits of either defendants' 1970 motion or Texaco's motion, but only whether it will choose to do so.

 Accordingly, this opinion will first outline the nature of defendants' 1970 motion, without prejudice to possible re-analysis should it later be heard on the merits. The next subject dealt with will be plaintiff's claim that defendants are estopped from bringing on this motion, or that this court should refuse to hear it for reasons of law of the case. *fn5" The third topic will be defendants' standing to assert the arguments attacking plaintiff's contract; in other words, defendants' standing to attack plaintiff's standing. The fourth subject will be the analysis of the procedural questions raised herein, and this court's conclusions regarding defendants' 1970 motion and plaintiff's cross-motion addressed thereto. Finally, plaintiff's objections to defendant Texaco's motion will be considered.

 A -- Nature of the Motion

 At the time of the argument before Judge Herlands, the parties evidently assumed that the contract, if not void or voidable for illegality or violation of public policy reasons, would be considered valid for purposes of this action. Analysis both of Judge Herlands' opinion, especially at page 91, and of the transcript of the hearing held before him in connection therewith, *fn6" demonstrates that the challenge to the contract raised at that time was different from this attack.

 Defendants now seek to reopen their attack on plaintiff's contract. To summarize their present position, they contend that their assumption of validity was made arguendo, and that the contract was in fact intrinsically invalid, and void ab initio. Defendants base this assertion on analysis of the law of Iran, which they argue would govern any action on the contract between the parties to it, and therefore should provide the source for the legal rules of interpretation of the contract for purposes of Section 4 of the Clayton Act. Defendants conclude that the "contract" was at all times worthless, and therefore could never have constituted "property" under the Clayton Act.

 It should be emphasized that, while defendants' assertion of Iranian law raises a question of "conflicts of law," it does not involve "choice of law." Regardless of the eventual dispositions of the present motions, the law of this case will remain United States anti-trust law, and specifically the Clayton Act. The term, "property," as used therein will continue to be defined as "an interest which the United States law protects," to quote Judge Herlands. *fn7" The determination of whether plaintiff's interest was sufficiently valuable to warrant protection, i.e., as "property," will still involve a value judgment based upon interpretation of the public policy expressed in the Clayton Act. *fn8" Resort to Iranian law, therefore, would be for the purpose of ascertaining the value of plaintiff's property, "a datum which is rendered material by the rule of decision which is found in the law of the forum." *fn9" To paraphrase: the availability of defenses in the nature of attacks upon a contract by a party not signatory thereto is a question of United States anti-trust law, although the defenses asserted may have arisen under foreign contractual law.

 The question of whether the plaintiff in this action possessed property is to be determined essentially through analysis of the strength of his business ties with NIOC. The parameters for this determination have already been established; Judge Herlands has determined that a "mere advantageous business relationship" would be insufficient, but that a "contract" would satisfy Section 4 requirements. *fn10" The additional facts asserted in the present motions present the court with an intermediate situation: a "contract" which is "infirm." Since the dichotomy permits of only two choices, it becomes necessary to determine whether what plaintiff possesses comes close enough to being a contract to escape the consequences of characterization as a mere business relationship.

 B -- Timeliness

 In light of the procedural history of this litigation, an obvious issue arises concerning the timeliness of defendants' 1970 motion. For, when dealing with unusual issues of conflicts of law,

 
"The invocation should have to be timely; the ground rules for the litigation should be settled at the outset. There should be no question of the foreign law hanging nimbus-like over the litigation, all-powerful in spite of ignorant neglect, ready to take over the moment anyone happens to notice it." *fn11"

 Two questions arise in this connection. The first relates to the extent to which the ground rules for this litigation have been or remain to be set. The second, which assumes that it has not yet been decided what law governs questions of contractual validity, relates to the ...


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