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HUNT v. MOBIL OIL CORP.

February 15, 1983

NELSON BUNKER HUNT, W. HERBERT HUNT and LAMAR HUNT, Plaintiffs,
v.
MOBIL OIL CORPORATION, TEXACO INC., STANDARD OIL COMPANY OF CALIFORNIA, THE BRITISH PETROLEUM COMPANY, LTD., SHELL PETROLEUM COMPANY, LTD., EXXON CORPORATION, GULF OIL CORPORATION, OCCIDENTAL PETROLEUM CORPORATION, GRACE PETROLEUM CORPORATION and GELSENBERG A.G., Defendants



The opinion of the court was delivered by: WEINFELD

EDWARD WEINFELD, D.J.

 The parties to this action have been engaged in litigation for eight years, and although a final judgment after a trial was entered as to some claims in November 1978, the end of the controversy is nowhere in sight. The action was commenced in 1975 by plaintiffs, Nelson Bunker Hunt, W. Herbert Hunt and Lamar Hunt ("the Hunts"), against the world's seven largest oil producing companies ("the majors"), Occidental Petroleum Corporation ("Occidental"), an independent oil producer, and other independents. Familiarity is assumed with the pertinent rulings by this Court prior to and after trial. *fn1"

 The Hunts' complaint contained four separate claims. The first charged the defendants with a per se violation of the antitrust laws based upon a preexisting customer clause as defined in the Libyan Producers Agreement ("LPA"); the second, with conspiracy to withhold from plaintiffs millions of barrels of crude oil to which they were entitled under the LPA; the third, with conspiracy to eliminate and destroy the plaintiffs as a competitor by preventing them from reaching an agreement with the Libyan Government, which ultimately led to the Hunts' nationalization by the Libyan Government and their elimination from competition as a producer of Libyan oil; and the fourth, with breach of contract of the LPA because of failure to supply the Hunts with ninety million barrels of oil as required by the terms of the LPA. Prior to trial, the Court dismissed plaintiffs' third claim under the Act of State doctrine. *fn2" It also stayed the fourth claim, the breach of contract claim, which was subject to arbitration under the LPA, pending a trial of the plaintiffs' first and second claims. *fn3"

 Following extensive pretrial discovery, the case went to trial against only the seven majors and Occidental on plaintiffs' first and second claims and the defendants' counterclaims for restitution and recision. After an eight-week trial, with a record of more than 7,000 pages, and hundreds of exhibits, this Court filed its decision in October of 1978, dismissing the Hunts' claims upon the merits, observing that "whatever claims plaintiffs have, essentially they are for breaches of contract . . . matters to be decided in an arbitration proceeding . . . provided for under the LPA." *fn4" The judgment was entered November 2, 1978, wherein the Court made a determination pursuant to Rule 54(b) of the Federal Rules of Civil Procedure that there was no just reason for delay and, based upon its findings of fact and conclusions of law, dismissed plaintiffs' first and second claims upon the merits and the defendants' counterclaims for failure of proof. The judgment, in its third decretal provision, "ORDERED and ADJUDGED . . .

 
that the plaintiffs' fourth claim, the breach of contract claim, is subject to arbitration under the terms of the Libyan Producers' Agreement, and plaintiffs' claims thereunder and defendants' defenses thereto, and counterclaims which were not resolved in the instant action may be presented in said arbitration, and the stay of the arbitration previously granted pending determination of the antitrust issues is hereby vacated.

 Following the entry of the aforesaid judgment, this Court heard nothing further of the matter until more than four years later when the majors and Occidental, by a motion dated December 1, 1982, and returnable December 14, moved for an order (1) enjoining the Hunts from commencing or prosecuting any claim or action that interferes with the continuation of the arbitration claims arising out of the LPA then pending before the American Arbitration Association, and (2) directing them to continue with the arbitration in accordance with the terms of the agreement and the prior orders of this Court. Thereafter the Hunts commenced a proceeding in the Supreme Court of the State of New York against the majors, Occidental, other independents who were parties to the pending arbitration and the American Arbitration Association. In that proceeding, the Hunts seek a judgment vacating an alleged final award by the Panel upon various grounds of alleged "misconduct" of the arbitrators, discussed hereafter. Thereupon, the defendants extended the scope of their motion to specifically enjoin the Hunts from proceeding with their state action. This was followed by a motion by the Hunts that this Court recuse itself pursuant to 28 U.S.C. § 455.

 We first consider the defendants' motion that the Hunts be directed to continue with the arbitration and that they be enjoined from proceeding with their pending state action. Preliminarily, the Hunts challenge this Court's jurisdiction because (1) it did not order arbitration, and (2) there are no federal claims in this action remaining before the Court.

 The essence of the lack of jurisdiction argument is that this Court did not "expressly" or "specifically" order "that the parties proceed to arbitration or that any judgment upon the arbitration award must be entered in this Court"; *fn5" that the judgment merely "stated" that the plaintiffs' fourth claim was subject to arbitration. This contention is sheer sophistry; it is not only a play on words, but disregards the determination made under Rule 54(b), as well as the history of the events that led to the lifting of the stay so that the arbitration could proceed as to plaintiffs' fourth claim and the defendants' counterclaims thereto, while the parties pursued their respective appeals.

 A manifest purpose of the entry of judgment under Rule 54(b) *fn6" and the ordering and adjudging of paragraph 3 was retention of jurisdiction over the fourth claim so that upon rendition of the final award by the arbitrators the parties could, as provided for by the United States Arbitration Act, *fn7" move to confirm, vacate, modify or correct a final award. If that was not the purpose, the fourth claim should have been dismissed. To accept Hunts' position that the Court did not "expressly" and "specifically" direct the parties to proceed to arbitration would mean that the Court's determination under Rule 54(b), which permitted the entry of judgment under claims 1 and 2 was a futile, unnecessary and meaningless act. *fn8"

 Moreover, the entire history of the litigation leaves no room to doubt that the breach of contract claim remained subject to the Court's jurisdiction pending the determination of the arbitration claims of plaintiffs and the defendants' counterclaims thereto. As early as November, 1975, the issue of the arbitrability of the fourth claim came to the fore. At that time, defendants had moved to stay all proceedings with respect to that claim pending arbitration and Texaco had served a demand for arbitration. Thereupon plaintiffs cross-moved to stay Texaco's demand for immediate arbitration pending the Court's determination of the remaining antitrust claims. The Court then observed that the arbitrability of the fourth claim is "beyond dispute" *fn9" and noted that "the breach of contract and antitrust claims are so inextricably interrelated, one with the other, that it would not be easy, in the light of the parties' contentions, for the arbitrators to avoid wandering into the thicket of complex antitrust issues." *fn10" Thus, the Court granted plaintiffs' cross-motion for a stay of arbitration on the breach of contract claim. Additionally, it granted the defendants' motion "for a stay of proceedings of the fourth claim in this action . . . except insofar as the breach of contract claim alleged therein is relevant and pertinent under the first and second antitrust claims." *fn11" Thus, the Court not only stayed the arbitration proceeding pending the Court's disposition of the antitrust claims, but it also stayed its own proceedings in this action on the breach of contract claim pending the completion of the arbitration. It is significant that the Rule 54(b) judgment, entered in 1978, did not lift the Court's stay of its own proceedings on the breach of contract claim and, therefore, that stay continues in force. Thus, the Court holds that pursuant to the judgment entered on November 2, 1978, it retained and continues to retain jurisdiction over the parties and the fourth claim as set forth therein.

 The plaintiffs next urge that the Federal Anti-Injunction Act, 28 U.S.C., section 2283, precludes this Court from granting an injunction restraining plaintiffs from proceeding with their state action. That Act contains an exception which authorizes a federal court to stay proceedings in a state court "where necessary in aid of its jurisdiction, or to protect or effectuate its judgments." *fn12" From what has already been set forth, it is abundantly clear that this case comes within the exception and that the Court is empowered to enjoin the Hunts' state court proceeding as necessary to effectuate the judgment entered in this action. *fn13"

 Finally, the Hunts alternatively urge that the Court should as a matter of discretion decline jurisdiction under the authority of United Mine Workers v. Gibbs14 since all federal claims (Hunts' claims Nos. 1 and 2 and the defendants' counterclaims thereto) supporting the pendent breach of contract claim (Hunts' fourth claim) have been dismissed under the judgment. In Gibbs, Mr. Justice Brennan noted that if the federal claims that provided the only jurisdictional basis for the pendent state claims are dismissed before trial, "the state claims should be dismissed as well." *fn15" Here, however, the federal claims were not dismissed until after extensive pretrial discovery, considerable motion activity and an eight-week trial. To suggest, as plaintiffs do, that considerations of "judicial economy, convenience and fairness to litigants" *fn16" warrant that the Court not exercise its jurisdiction and dismiss the breach of contract claim in favor of the Hunts' proceeding in the state court is to turn these concerns topsy turvy. The considerable familiarity of this Court with the complex issues involved in the case throughout its history not only justifies but requires that this Court exercise its jurisdiction. *fn17" Thus we consider defendants' motions on the merits.

 Since the entry of judgment the parties have been engaged over a four-year period in one aspect or another of the arbitration. More than two years was consumed by a screening process before they finally agreed on May 22, 1981, upon three arbitrators to constitute the Panel ("Panel"). The next six months were consumed with preliminary matters, including the establishment of ground rules governing the order of presentation of the parties' claims, which resulted in a three-phase format. Under Phase I the Hunts were to offer proof in support of their claims against the majors and Occidental. Thereafter, the majors and Occidental were to follow with proof in support of their claims against the Hunts. Phase II was to be devoted to the claims of parties to the arbitration other than the Hunts. Phase III was to be devoted to damages.

 Phase I began in December 1981, with the Hunts' presentation in support of their claims. The evidence consisted of more than 1,300 documents, portions of trial testimony before this Court and four affidavits. The Hunts rested their case in June of 1982. Thereafter, before offering evidence to sustain their own claims, the ...


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