The opinion of the court was delivered by: Sweet, District Judge.
Defendant I.T.I. Shipping, S.A. ("I.T.I.") moves for
reargument of this court's dismissal of its third-party
complaint against Petroleos Mexicanos ("Pemex") under the
Foreign Sovereign Immunities Act of 1976 ("FSIA"), Title
28 U.S.C. § 1605(a)(2) and, in the alternative, for an order
dismissing the complaint of plaintiff Marathon International
Petroleum Supply Company ("Marathon") under Rule 19 of the
Federal Rules of Civil Procedure and for an extension of its
time to appeal. For the reasons set forth below the motions to
reargue and to dismiss for want of an indispensable party are
denied and the motion for an extension of time to appeal is
The facts and proceedings of this case are set forth in
detail in the January 16, 1990 opinion (the "opinion"),
familiarity with which is assumed. 728 F. Supp. 1027. Oral
argument was heard on the reargument on February 16, 1990 and
on the Rule 19 motion on March 9, 1990. The motions were
considered submitted as of the latter date. On February 22,
1990 I.T.I. filed a motion for an extension of time in which to
file a Notice of Appeal pursuant to Rule 4(a), (5) of the
Federal Rules of Appellate Procedure and on March 5, Pemex
filed an opposition to that motion. This motion is also
considered submitted as of March 9, 1990.
Reargument of Direct Effect Under the FSIA
I.T.I. moves for reargument on the basis that the court
overlooked relevant case law when in fact I.T.I. has abandoned
its original theory of jurisdiction and has recast its entire
argument to try now another method for obtaining jurisdiction.
I.T.I. has dropped its initial claim that the court must
evaluate I.T.I.'s jurisdiction in light of Rule 14(c) and thus
Marathon's jurisdiction to adjudicate and now contends that
I.T.I. has jurisdiction to adjudicate because of the "direct
financial loss" I.T.I. will suffer by dint of its having to
engage in litigation and risk potential monetary exposure in
the United States. Notwithstanding the impropriety of using
reargument to switch one's theory of the case, I.T.I.'s new
assertion is equally unpersuasive.
I.T.I.'s position that the activity of a foreign sovereign
which caused "foreseeable financial consequences" lends
jurisdiction is based on the reversed lower court decision in
International Housing Ltd. v. Rafidain Bank Iraq, 712 F. Supp. 1112
(S.D.N. Y. 1989), rev'd, 893 F.2d 8 (2d Cir. 1989). Not
only was the latest circuit opinion brought to the parties'
attention and relied upon in the January opinion, but when
applied to I.T.I.'s recast theory, it effectively bars I.T.I.'s
claim. See International Housing, 893 F.2d at 11 (a financial
injury to a foreign corporation does not constitute a direct
effect in the United States when losses in the underlying
transaction occurred elsewhere and method of transaction
incidental to United States interests).
I.T.I. in its reply memorandum now concedes that whether the
plaintiff is a foreign corporation is relevant to whether the
financial loss constitutes a direct effect in the United States
but concludes, contrary to the facts here, that the facts of
International Housing did not allow for a finding of a direct
financial loss. I.T.I.'s presence in an American court,
however, is only a by-product of the underlying dispute over
the commercial activity and thus is, at best, an indirect
result of commercial activities conducted outside of the United
States. As in International Housing, the foreign corporation's
loss occurred outside of the United States, and thus there is
no direct financial loss to the foreign corporation in the
United States. International Housing, 893 F.2d at 11.
Finally, I.T.I. challenges the court's reliance on the
arbitration clause through which Marathon "contracted away"
recourse to an American court. I.T.I. concludes that because
one clause of the contract says "may arbitrate" that the
contract is optional and thereby relies on its Rule 14(c)
bootstrapping argument that Marathon's jurisdiction would
confer jurisdiction upon I.T.I. Not only does I.T.I. omit the
very next paragraph which states that the parties
shall arbitrate unless they expressly agree otherwise, but the
Second Circuit has precluded this argument by holding that
similar language is indeed mandatory and the exclusive remedy
provided for in the agreement. See Local 771, I.A.T.S.E. v. RKO
General, Inc. WOR Div., 546 F.2d 1107, 1116 (2d Cir. 1977).
The motion for reargument is denied.
Absent jurisdiction to adjudicate over Pemex, I.T.I. contends
that the entire action should be dismissed under Rule 19 of the
Federal Rules of Civil Procedure because Pemex's absence will
preclude complete relief amongst the parties and I.T.I. will
thereby be prejudiced in that it will be unable to seek
indemnity or contribution in this action from the allegedly
"principal tortfeasor and/or party at fault, Pemex" without
retrying the action against Pemex in Mexico at great expense
and waste of judicial economy.
Rule 19 of the Federal Rules of Civil Procedure provides for
compulsory joinder of parties who are needed for just
adjudication. Rule 19 entails a two-step inquiry. Rule 19(a)
sets forth the standards for ...