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CAMREX CONTRS. LTD. v. RELIANCE MARINE APPLICATORS

February 3, 1984

CAMREX CONTRACTORS (MARINE) LIMITED, Plaintiff,
v.
RELIANCE MARINE APPLICATORS, INC., CAMREX RELIANCE PAINT COMPANY, INC., JERRY C. ARGER, ANDREW A. ARGIRIADI, JAMES MARDIKOS, and ANTHONY SALEH, Defendants



The opinion of the court was delivered by: NEAHER

MEMORANDUM OF DECISION AND ORDER

 NEAHER, District Judge.

 Plaintiff brought this action involving a dispute in the overhaul of two ships under the Court's admiralty and maritime jurisdiction. 28 U.S.C. ยง 1333; Fed. R. Civ. Pro. 9(h). After conferring with the parties, the Court bifurcated the proceedings. The first stage would determine whether a contract exists and, if so, its terms. The second stage would resolve recovery questions.

 At a non-jury trial plaintiff presented its evidence on the first stage issues. Based on that evidence, the Court now holds that a contract was formed by the October 27-30, 1978 telexes, as modified by the November 10, 1978 telexes. The terms are those explicitly agreed to within the confines of those telex exchanges and the agreement continues to exist. The facts and discussion which follow constitute the Court's findings of fact and conclusions of law. Rule 52(a), Fed. R. Civ. Pro.

 I. FACTS

 Plaintiff Camrex Contractors (Marine) Limited ("CCML") is the wholly-owned subsidiary of Camrex (Holdings) Limited ("Camrex"), an English holding company. *fn1" Also located in England, CCML is a marine contractor engaged in the grit blasting and coating of ships' surfaces. During the relevant period, Peter Dillon and Alan Miller were on Camrex's main board of directors.

 In July 1978, Keith Pagnam was named CCML's managing director. Anthony Saleh, a CCML director then and a defendant now, was passed over for that position and, thereafter, answered to Pagnam. Robert Antliff, CCML's marine manager, in turn, reported to Saleh.

 Besides Saleh, the defendants are two New York corporations, Camrex Reliance Paint Co., Inc. and Reliance Marine Applicators, Inc., and three individuals, Jerry Arger, Andrew Argiriadi and James Mardikos. *fn2" Camrex Reliance Paint Co., Inc. ("Camrex Reliance"), which supplies ships' paint requirements, was acquired in 1974 (under a different name) by Arger, Argiriadi and Mardikos ("the partners"). In 1977, Camrex purchased 40% of Camrex Reliance's stock (hence, the name change) and two Camrex main board members, Dillon and Miller, joined the three partners to form Camrex Reliance's five-person board, with the stipulation that four directors must agree before any action was taken. Subsequently, another corporation, Reliance Marine Applicators, Inc. ("Applicators"), was founded in August 1978 by Whale Chemical Co., Inc., which also was owned by the partners. *fn3"

 After the stock was acquired, CCML assisted Camrex Reliance in bidding for projects and in managing the work following successful bids. In furtherance of these joint undertakings, Saleh made several trips from England to New York beginning in 1978. In July of that year, a bid was accepted from Coastal Dry Dock and Repair Corp. ("Coastal"), a shipyard owning company in New York, to grit blast and coat the U.S.S. Butte. Besides managerial assistance on that project, CCML provided labor and equipment at a per square footage price.

 After Pagnam's appointment, Saleh made several trips to New York. In mid-August, Saleh informed Pagnam, Antliff and others that he was going to secure a major contract for CCML's American "sister company", Camrex Reliance. CCML would provide the men and equipment, while Camrex Reliance would provide the materials. Due to a recession in the European maritime industry, CCML had been desirous of working across the Atlantic and its management (Pagnam, et al.) were delighted with the good news. In anticipation of landing the contract, Saleh began mobilizing men and equipment. He did not, however, seek project approval from Camrex's main board (Dillon, et al.), thereby possibly violating corporate procedure.

 The hoped for venture emanated from the U.S. Navy. In late summer 1978, Coastal, the prime contractor, had received job orders to overhaul the U.S.S. Caloosahatchee and the U.S.S. Kalamazoo. In mid-September, the partners submitted the first of several proposals to Coastal for the grit blasting and coating subcontract. On October 13, Coastal issued purchase orders totaling $1,800,000 for the two ships to Applicators ("c/o Camrex Reliance"). PX 47 and 48. Jerry Arger signed his acceptance on Applicators' behalf.

 On October 20, Saleh resigned from CCML and accepted a position with Applicators, for whom he began work in January 1979. Despite that resignation, Saleh remained with CCML until mid-December 1978.

 Antliff, at Saleh's direction, prepared a square footage quotation for the ships. On October 27, 1978, using Saleh's calculations, Antliff sent a quotation by telex to Camrex Reliance for $1.47 per square foot. The telex also listed services to be included and excluded (the rights and obligations of the contracting parties). PX 59. Immediately answering, Arger sought $1.46 and responded as well to other aspects of the proposal. He closed by stating:

 
ALL WORK TO BE DONE IN ACCORDANCE TO SHIPS SPECIFICATIONS, AND CONTROL AND RESPONSIBILITY OF THE JOB IS ASSUMED BY YOURSELVES.
 
REGARDS
 
JERRY ARGER
 
CAMREX RELIANCE

 PX 60.

 Still on October 27, CCML wired back agreeing to $1.46 for the Kalamazoo but asking $1.47 for the Caloosahatchee and $1.37 for new areas, adding:

 
WE HAVE RECORDED THE OTHER ITEMS MENTIONED AND AGREE WITH YOUR PROPOSALS.

 PX 61.

 Arger's answer was not forthcoming; and on October 30, Antliff requested confirmation, while raising other matters (contract cancellation charges, CCML's contact with shipyard management, etc.). PX 62. Arger responded the same day without disclosing that the Coastal contract was with Applicators, not with Camrex Reliance, and stating

 
WITH . . . REFERENCE TO OUR TELEX OF OCTOBER 27, AND YOUR REPLY OF OCTOBER 27, 1978 YOUR REFERENCE . . . REGARDING . . . THE CALOOSAHATCHEE AND KALAMAZOO PLEASE NOTE THAT WE ACCEPT YOUR OFFER AS NOTED IN OUR TWO AFOREMENTIONED TELEXES. HOWEVER REGARDING YOUR REQUEST OF 1.37 USDLRS ON NEW BUILDING AND OR EXTRA AREAS WE RESERVE THE RIGHT TO DISCUSS SAME WITH YOU TO A MUTUAL SATISFACTORY AGREEMENT WHEN YOU VISIT US THIS WEEK.

 PX 63 (emphasis added). *fn4"

 About this time, CCML employees in New York remeasured the ships' square footage and discovered that, rather than 674,000 as previously estimated, the total was between 800,000 and 900,000 square feet.

 On November 3, using both English and American labor as well as much of its own equipment, CCML started work on the Caloosahatchee. Two days later, CCML (Antliff and Saleh) and Camrex Reliance (the partners) had a meeting. Arger announced that the contract was being changed and that the offer was now $1,000,000 lump sum for both ships or, alternatively, the hiring of CCML's men and equipment on a daily basis. The new proposal was prompted by the square footage remeasurement and the attendant realization that the partners' Coastal contract, itself a lump sum agreement, was underpriced. Arger gave CCML forty-eight hours to decide.

 Receiving word in England, Pagnam was strongly adverse, believing that the October 27-30 telex exchange constituted a contract and, moreover, that a change was unacceptable. He sent a telex reflecting his beliefs.

 Pagnam also summoned Saleh and Antliff from New York. Prior to leaving, they had "costed" the $1,000,000 proposal, determined it commercially viable and communicated that assessment to Pagnam. *fn5" Tr. at 166-67. During their return, Saleh and Antliff discussed the situation. According to Antliff's testimony, Saleh mentioned that Camrex Reliance would get $1,400,000 from Coastal (a sum varying from the purchase orders' $1,800,000), and that Camrex Reliance would be responsible for taxes and insurance costs on local labor, which ran about.62 per wage dollar. *fn6" Tr. at 168.

 In the meantime, Pagnam consulted English counsel, who advised that the October telexes were not a contract. After returning, Antliff did not inform Pagnam about Saleh's statements concerning the Coastal price and Camrex Reliance's responsibility for the local labor costs. Even without that information, Pagnam still directed Antliff to accept the $1,000,000 offer.

 Reportedly, Pagnam was under substantial pressure when he made this decision. Arger had threatened to impound CCML's equipment and to sue. Also, withdrawing from the project would have been financially costly and could have been damaging to CCML's world-wide reputation. Lastly, Pagnam had to decide quickly.

 Acting on Pagnam's instruction, Antliff wired the acceptance:

 
RE: CONTRACT FOR VESSELS USS CALOOSAHATCHEE AND USS KALAMAZOO
 
WE ACCEPT RELIANCE INC'S OFFER OF DOLLARS 1,000,000 FOR . . . 830,000 FT2. . . .
 
WORK HAVING COMMENCED ON THESE CONTRACTS FRIDAY 3RD NOVEMBER 1978 STAGE PAYMENTS WILL BE AS AGREEMENT REACHED AFTER DISCUSSIONS 8TH ...

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