UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK
October 6, 1983
TRI-EX ENTERPRISES, INC., Plaintiff, against MORGAN GUARANTY TRUST COMPANY OF NEW YORK, FEDERAL REPUBLIC OF NIGERIA and CENTRAL BANK OF NIGERIA, Defendants, against ALAN LONDON and LIME INTERNATIONAL CORPORATION, Third-Party Defendants.
The opinion of the court was delivered by: CONNER
OPINION AND ORDER
The instant action involves but one of many disputes that have followed in the wake of the huge and ill-conceived program of cement purchases by the Federal Republic of Nigeria ("Nigeria") during 1974 and 1975. In the specific transaction at issue in this case,
plaintiff Tri-Ex Enterprises, Inc. ("Tri-Ex") agreed in April 1974 to supply to Nigeria 500,000 metric tons of cement at a price of $49.50 per metric ton. To facilitate payment for the cement, the Central Bank of Nigeria ("CBN") issued through Morgan Guaranty Trust Company ("Morgan") an irrevocable letter of credit in favor of Tri-Ex.
During the middle of 1975, a massive backlog of ships waiting to discharge their cargos developed in the Port of Lagos, Nigeria. In response to this congestion, Nigeria and CBN took certain actions during the late summer and fall of 1975 to regulate the arrival of cement-carrying ships at the Port. First, on August 9, 1975, Nigeria issued Government Directive No. 1434 which required, inter alia, that all shippers give the Nigerian Port Authority two months' advance notice of a ship's scheduled arrival and of the contents of the ship's cargo, and obtain prior approval from the Port Authority for the sailing. See Ex. A. to Berger Aff. Second, in September 1975, Nigeria sent Tri-Ex a Telex directing Tri-Ex to suspend further delivery of cement to Nigeria. See Ex. B to Berger Aff. Then, on September 30, CBN Telexed Morgan and directed Morgan not to pay under any letter of credit without first obtaining confirmation from CBN that the shipments for which payment was being requested had been cleared by the Nigerian Port Authority. See Ex. C to Berger Aff. Finally, on December 19, 1975, Nigeria promulgated Decree No. 40, which imposed criminal penalties for unauthorized entry into a Nigerian port. See Texas Trading & Milling Corp. v. Federal Republic of Nigeria, 647 F.2d 300, 305 (2d Cir.), cert. denied, 454 U.S. 1148, 102 S. Ct. 1012, 71 L. Ed. 2d 301 (1982).
In Decor by Nikkei International, Inc. v. Federal Republic of Nigeria, 497 F. Supp. 893 (S.D.N.Y. 1980), aff'd, 647 F.2d 300 (2d Cir.), cert. denied, 439 U.S. 955 (1981), Judge Pierce of this Court ruled that these same acts by Nigeria and CBN constituted the anticipatory breach of other contracts materially identical to those at issue in the instant case. Nikkei was a consolidated action involving three separate suits by individual suppliers of cement under contracts entered into, as in the instant case, during Nigeria's prolific period of cement procurement.With respect to the defendants' breach of their obligations under the letters of credit, Judge Pierce found:
The evidence submitted at trial indicates that Nigeria did not intend to provide Nikkei or any of the other plaintiffs herein with the certificates they would need to obtain payment due from Morgan under the letters of credit as amended unless they agreed to cancel their cement contracts.
497 F. Supp. at 900.
Moreover, Judge Pierce ruled that Nigeria's and CBN's conduct in August through December 1975 "clearly demonstrate[s] Nigeria's intent to terminate its performance under these [cement] contracts." Id. at 908.
On the basis of these findings, Tri-Ex contends that Nigeria and CBN should be collaterally estopped in the instant proceeding from arguing that they did not anticipatorily breach their contracts with Tri-Ex. Consequently, plaintiff seeks summary judgment pursuant to Rule 56, F.R.Civ.P., on the issue of Nigeria's and CBN's liability for anticipatory repudiation of their contracts with Tri-Ex. For the reasons stated below, that motion is denied.
Under the doctrine of collateral estoppel, often referred to as issue preclusion, once a court has actually and necessarily decided an issue of law or fact, that determination will bar relitigation of the issue in a subsequent suit on a different cause of action involving a party to the prior lawsuit.
Montana v. United States, 440 U.S. 147, 152, 59 L. Ed. 2d 210, 99 S. Ct. 970 (1979). It is undisputed that a litigant who was not a party to the first action may assert collateral estoppel offensively in a subsequent proceeding against the party who lost the decided issue in the prior case.See Allen v. McCurry, 449 U.S. 90, 95, 66 L. Ed. 2d 308, 101 S. Ct. 411 (1980). But although this offensive use is permitted, the trial court has broad discretion to determine when it should be applied. Parklane Hosiery Co., Inc. v. Shore, 439 U.S. 322, 331, 58 L. Ed. 2d 552, 99 S. Ct. 645 (1979). If for any reason it would be unfair to a defendant to bind him by a prior finding, the court should not allow the use of offensive collateral estoppel. See id.
It is simply unwarranted, at this stage of the instant litigation, to determine conclusively that Nigeria and CBN anticipatorily repudiated their contracts with Tri-Ex based solely upon the findings in Mikkei. A contract by its very nature embodies rights and duties on both sides. Although the same actions that constituted the anticipatory breach in Nikkei are present here, this Court is not prepared to rule on the basis of Nikkei that a breach of the Tri-Ex contracts occurred until it is satisfied that Tri-Ex was situated similarly to the plaintiffs in that case.
The fact that the same material terms exist in the Tri-Ex contracts as existed in the Nikkei contracts does not by itself place the plaintiffs in analogous positions. Nigeria and CBN have alleged several defenses to Tri-Ex's claim.Among those defenses are allegations that the contracts are unenforceable because Tri-Ex procured them illegally and performed under them fraudulently, and that, even if they are enforceable, Tri-Ex's own actions after the fall of 1975 demonstrate that no anticipatory breach occurred. Clearly these defenses present material issues of fact which preclude the application of collateral estoppel and the granting of summary judgment at this point. The Court obviously cannot rule that defendants have anticipatorily breached their contracts unless it finds, as a matter of law, that enforceable contracts exist. The issues of fact preclude such a ruling.
This is not to say, as Nigeria and CBN contend, that simply because the Tri-Ex agreement is a separate physical contract from the contracts in Nikkei it is necessarily not susceptible to the application of collateral estoppel. Although contracts may involve different parties, they are not necessarily unique in the same way that parcels of land are considered by the law to be unique. Thus, unlike cases involving land, ordinary contract actions are not automatically immune from the application of collateral estoppel. Cf. Milens of California v. Richmond Redevelopment Agency, 665 F.2d 906, 908 (9th Cir. 1982) (since each parcel of real estate is unique; prior adjudication that city agency liable for inverse condemnation on one property not binding on question whether same agency liable for identical action on adjoining property).
The Court does not intend, in the instant case, to retry the question whether defendants' actions constitute an anticipatory breach of their contracts. If defendants fail to establish their affirmative defenses at trial, the Court will at that time apply collateral estoppel and rule that defendants have anticipatorily breached their obligations to Tri-Ex. At this stage of the proceeding, however, preliminary issues of fact concerning the existence of an enforceable contract preclude the Court from granting Tri-Ex's motion.
Accordingly, plaintiff's motion for partial summary judgment must be denied.