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MARATHON INT'L PETRO. v. I.T.I. SHIPPING

January 16, 1990

MARATHON INTERNATIONAL PETROLEUM SUPPLY CO., PLAINTIFF,
v.
I.T.I. SHIPPING, S.A., IN PERSONAM, M/T RUTH M, HER ENGINES, TACKLE, APPAREL, ETC., IN REM, AND SAYBOLT DE MEXICO, S.A., IN PERSONAM, DEFENDANTS. I.T.I. SHIPPING, S.A., IN PERSONAM, M/T RUTH M., HER ENGINES, TACKLE, APPAREL, ETC., IN REM, AND SAYBOLT DE MEXICO, S.A., IN PERSONAM, DEFENDANTS AND THIRD-PARTY PLAINTIFFS, V. PETROLEOS MEXICANOS, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Sweet, District Judge.

Third-party defendant Petroleos Mexicanos ("Pemex"), brings this action to dismiss the Third-Party Complaint of defendant and third-party plaintiff, I.T.I. Shipping, S.A. ("I.T.I.") for lack of jurisdiction to adjudicate*fn1 and personal jurisdiction over Pemex under the Foreign Sovereign Immunities Act of 1976 ("FSIA"). 28 U.S.C. § 1602 et seq. For the reasons set forth below, the motion is granted.

Parties

Pemex is a decentralized agency of the Mexican government charged with the exploration and development of Mexico's petroleum resources. It is a separate legal person having been created in 1938 by Special Decree of the Mexican Congress. It is not privately owned and has no shares of stock. Pemex is a "foreign state" within the definition of 28 U.S.C. § 1603(a)-(b) of the FSIA.

I.T.I. is a foreign corporate entity with a United States office and place of business at 1144 Avenue of the Americas, New York, New York, and is the registered owner of the M/T "Ruth M".

Saybolt de Mexico ("Saybolt") is a corporate entity existing under the laws of Mexico, with an office and principal place of business in Coatzacoalos, Mexico.

Marathon International Petroleum Supply Co. ("Marathon"), is the plaintiff in the underlying cause of action and a United States corporation.

Facts

On July 1, 1981, Marathon and Pemex entered into a contract for the sale of Maya crude oil. The contract was negotiated and signed in Mexico. The oil was to be loaded onto vessels nominated by Marathon at one of three Mexican ports. Under the contract, it was agreed that the base, sediment, and water ("BS & W") contained in the crude oil would be deducted from the total price. Title to the crude oil and risk of loss passed to the buyer at the time the oil passed the flange connection between the delivery hose and the vessel's cargo intake at the loading port in Mexico. The crude oil was to be tested for BS & W content at the loading port in Mexico. There was a Mexican choice-of-law provision in the contract. In the event of a dispute, the contract contained an arbitration clause which provided for arbitration before the International Chamber of Commerce in Paris.

A wholly-owned subsidiary of Marathon, Hancock Shipping Company, Ltd., entered into a tanker voyage charter party of the M/T "Ruth M" with I.T.I. to transport and deliver the cargo of oil purchased from Pemex from a Mexican East Coast port to a United States port.

Marathon retained Saybolt to sample and analyze the purchased crude oil to ensure that the BS & W content was deducted from the total price of the crude oil loaded on the Ruth M. Prior to departure of the Ruth M from Mexico, Saybolt conducted its analysis of the crude oil and advised Marathon that the BS & W content constituted 0.10% of the total amount of crude oil provided by Pemex. Upon the arrival and discharge of the cargo in the Louisiana Offshore Oil Port, a loss of 12,438 barrels of crude oil and a corresponding increase of 12,605 barrels in free water was noted by Marathon.

Marathon alleges damages for cargo loss. The basis for Marathon's suit is the failure of I.T.I. and the Ruth M to deliver the crude oil in the same good order as it was delivered at the port of shipment and the alleged negligence of Saybolt resulting in the inaccurate measurement and under-reporting of the BS & W content of the crude oil. I.T.I. contends that the only evidence as to the source of the alleged free water is that it originated from Pemex's shore facility at Rabon Grande, Mexico and that Pemex furnished free water rather than Maya crude oil to Marathon during the loading of the M/T Ruth M.

I.T.I. has impleaded Pemex alleging that any loss in cargo sustained by Marathon is solely the result of negligence, breach of express and implied warranties, and breach of contract by Pemex. Marathon, however, has not commenced an action against Pemex or commenced arbitration against Pemex pursuant to the terms of the crude oil supply contract. I.T.I. contends that Pemex is an indispensable party to this action and should Pemex's motion to dismiss be granted, then Marathon's complaint should be dismissed under Rule 19 of the Federal Rules of Civil Procedure for lack of an indispensable party.

Pemex's contacts with the United States consist of: (1) a listing of an office and telephone number on page 1214 of New York Telephone's Official White Pages for Manhattan 1988-1989; (2) advertisements in 1989 in the Journal of Commerce published in New York; (3) An office and ...


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