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PRUDENTIAL OIL CORP. v. PHILLIPS PETROLEUM CO.

April 4, 1975

PRUDENTIAL OIL CORPORATION, Plaintiff,
v.
PHILLIPS PETROLEUM COMPANY, Defendant



The opinion of the court was delivered by: EDELSTEIN

MEMORANDUM

 EDELSTEIN, Chief Judge.

 Pursuant to Fed. R. Civ. P. 39(a) Defendant has moved this court for an order "striking plaintiff's demand for a jury trial in this action on the ground that under the Seventh Amendment to the United States Constitution, as implemented by Rule 38, F.R.C.P., plaintiff has no right to a jury trial in this action." Defendant's Notice of Motion at 1. Defendant does not object to the timeliness of Plaintiff's jury demand.

 Plaintiff's complaint is extremely prolix; thus, for purposes of this memorandum, the court will attempt to deal with the facts as alleged in this complaint as succinctly and simply as it can.

 Plaintiff is the assignee of the interest of a corporation that engaged primarily in oil exploration financing. Plaintiff alleges that the Economic Development Administration of Puerto Rico (E.D.A.) desired the establishment of a petrochemical production facility on the Island of Puerto Rico in order to increase general economic growth of the Island. At the time that the operative events in this action occurred, Puerto Rico already had two oil refineries. The project undertaken by the E.D.A. envisaged the construction of a third refinery with satellite petrochemical facilities to utilize the petroleum derivatives from the third refinery. The project was complicated from an economic, financial and political standpoint.

 Plaintiff was brought into the transaction by E.D.A. on the recommendation of two New York City investment banking houses after the withdrawal from the initial promotion group of one of its active participants. Plaintiff undertook sponsorship of the project and as part of its activities Plaintiff entered into an arrangement with Defendant whereby Defendant would supply the crude oil for the project and purchase the refined products not used in the petrochemical operations. Allegedly, Defendant also undertook to furnish consultation in the design, construction and operation of the project. Attached as Exhibit A to the complaint is a letter from Defendant's President to Mr. N. M. Shippee, Chairman of Plaintiff, which states that in connection with the project Phillips is prepared: (1) to provide raw crude oil for the refinery and (2) to purchase refined petroleum products not consumed in the then contemplated petrochemical facilities, and (3) to counsel and assist Plaintiff in the design, construction and operation of the proposed facility. Over a period of a few years Plaintiff and Defendant worked closely on the project. Plaintiff asserts that it divulged to Defendant detailed information that Plaintiff had accumulated as a result of its efforts.

 After a period of time it was determined that the plans for an overall petrochemical facility were not feasible in light of the difficulty encountered in obtaining commitments from potential users of petrochemical products from the refinery. Because of this problem the plans for the project were altered by narrowing the project initially "to a 'core' refinery which, though designed to produce the maximum yield of petrochemical raw materials to feed various 'satellite' petrochemical plants, would be sufficiently viable to produce larger amounts of normal refinery products during the early years when the 'satellite' and other consuming plants could be installed." It was contemplated that after the refinery was constructed and began operations, petrochemical users could be attracted to build other manufacturing facilities.

 Plaintiff contends that in order for the entire project to become feasible it was necessary to obtain an allocation of oil imports from the Department of the Interior, the application for which had to be made by Phillips for reasons not relevant to the instant motion. It is further alleged that some time after the successful application for the change in the Oil Import Regulations, Plaintiff was excluded from the venture by Defendant-Phillips. Phillips and E.D.A. brought the project to a successful conclusion. The refinery that was ultimately constructed was operated by a corporation called "Phillips Puerto Rico Core Co." (Core).

 Upon these facts Plaintiff raises four claims for relief, with respect to each of which Plaintiff asserts that it has no adequate remedy at law. Complaint para. 39. The first claim is, essentially, that "[pursuant] to the acts, representations and agreements between Prudential and Phillips, a joint venture was formed between the parties"; that pursuant to the joint venture Plaintiff disclosed to Defendants all of the details, ideas and information which made it possible for the project to be successfully completed; and that Defendant has (a) misappropriated and wrongfully excluded Plaintiff from the fruits of the joint venture, (b) refused to account to Plaintiff for the fruits of the joint venture and to pay over to Plaintiff the business properties, rights and interests acquired by Defendant in its own name but for the account of the joint venture, and (c) by reason of the foregoing, Defendant has breached its agreement and its duty of trust and fair dealing to Plaintiff and holds the fruits of the venture, including the equity interest in Core, for the right and benefit of Plaintiff.

 For its second claim, Plaintiff alleges misappropriation by Defendant of ideas, data and the like developed by Plaintiff and disclosed to Defendant pursuant to Defendant's acts, agreements and representations. Alleging that the information was disclosed in trust and confidence to Defendant and to be used solely for Plaintiff's benefit, Plaintiff states that by its misappropriation, Defendant inflicted upon Plaintiff wilful, intentional and malicious harm.

 Similar to the second claim, the third claim alleges that Defendant, by its acts, statements and representations, intended to induce Plaintiff, inter alia, to disclose its data and to cooperate with Defendant in obtaining the necessary permits and licenses, while concealing its true intention to misappropriate the full benefits of the project and to exclude Plaintiff. Plaintiff alleges that but for such deceitful conduct it neither would have divulged the confidential information to Defendant nor cooperated with it. Finally, Plaintiff alleges that "by reason of the foregoing ", Defendant, in equity, holds the fruits of the project on a constructive trust for the benefit of Plaintiff.

 For its fourth and final claim, Plaintiff alleges that it refrained from taking any action detrimental to Defendant's efforts to obtain any permits, rights or the like necessary for the establishment of the project. Its forbearance, Plaintiff claims, was directly caused by the acts, representations and agreements of Defendant, "which creates as a fact of equity the right of Plaintiff to share in the fruits and benefits accruing therefrom."

 The structure of Plaintiff's prayer for relief reveals Plaintiff's intention that its five subparagraphs are intended to apply to "all" of the claims theretofore raised. It reads as follows:

 
1. That an accounting be had between plaintiff and defendant Phillips as to the transactions had in joint venture hereinabove alleged and that a division be made of the respective rights and interests of the parties in said joint ...

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