The opinion of the court was delivered by: Leisure, District Judge.
The claims asserted in this lawsuit derive from the confused
events surrounding various parties' attempts to purchase the
Brazilian Friendship. All of the parties in this action have
some involvement in the business of investing in ships, whether
as brokers, principals, or scrappers of distressed vessels. The
moving defendants are AGR, a corporation formed under the laws
of Texas, and Jaross, vice president and treasurer of AGR
(collectively, the "moving defendants"). AGR is engaged in the
business of buying, selling, salvaging, repairing and scrapping
vessels. By written agreement dated June 30, 1986, AGR
contracted to locate scrap and distressed vessels for defendant
Bomar Resources, Inc. ("Bomar"), a trader in such vessels.
Defendant A.L. Burbank ("Burbank") is a shipbroker that has
frequently acted as broker for AGR and Bomar in ship
Counterclaim defendant Lygren is a Norwegian citizen and
Swiss resident with extensive experience as a shipbroker. He
claims that since the fall of 1986 he has acted primarily on
behalf of plaintiff International Minerals and Resources, Inc.
("IMR"), as a principal. IMR is a corporation organized under
the laws of Liberia and formed at the request of Lygren, who
manages its affairs under a power of attorney. IMR is engaged
in the business of investing in ships and in transporting bulk
cargoes by sea.
Plaintiff International Shipping Company, S.A. ("ISC"), is a
corporation formed under the laws of Panama and a wholly owned
subsidiary of IMR, acquired for the purpose of taking title to
the Friendship. ISC is managed by Lygren under a power of
attorney. Plaintiff Lygren Maritime Services ("LMS") is a Swiss
corporation, of which Lygren is principal shareholder,
president and chief executive officer. Until at least the
latter part of 1985, LMS acted primarily as a broker in the
sale and purchase of second-hand vessels, negotiating
shipbuilding and transportation contracts, and financing ships.
In November 1985, the Friendship ran aground in the Orinoco
River in Venezuela, while carrying a cargo of some 64,000
metric tons of iron ore. The ship and its cargo were the
subject of considerable international interest by those
involved in the purchase and sale of distressed vessels, for
salvage, scrap or restoration. Among those interested in the
ship's availability were the plaintiffs and defendants in this
action. Title to the vessel was not clear until April 1987,
when it passed to a local salvage company in Venezuela, which
nominated Hydra Offshore Ltd. ("Hydra") to take title to the
The parties do not dispute that Lygren and Jaross spoke on or
about November 17 or 18, 1986, concerning a plan whereby AGR,
Lygren and defendant Bomar would acquire the vessel and tow it
to a Romanian shipyard, where the cargo of iron ore would be
traded for the cost of repairs. Lygren informed the moving
defendants that he had extensive connections in Romania and
could secure a good price for the ore. Plaintiffs characterize
the plan as a proposed joint venture, to which defendants never
committed. The moving defendants assert that Lygren agreed to
act as their broker.
Lygren and Jaross also discussed a number of other vessels
then available in the market. The moving defendants claim, and
plaintiffs deny, that Lygren was acting as AGR's broker for
those vessels. However, Lygren admits that, in January 1987, he
acted as AGR's broker during a trip to Moscow that did not
involve the Friendship.
In early January 1987, Jaross visited Lygren's home in
Switzerland; the parties dispute whether the Friendship was a
subject of discussion. Lygren declares that during that visit,
he concluded that the joint venture would never go forward,
because of Jaross's personal, legal and financial problems.
Later that month, Lygren received a repair quote from the
Romanian shipyard and submitted a bid for the ship on behalf of
either IMR or ISC,*fn2 which was met by a counteroffer.
See PX 43-45. Lygren admittedly did not inform AGR or Jaross of
either the repair quote or the bid.
Lygren again submitted bids in April 1987, after legal title
to the ship had been resolved. See PX 50-53. On April 23, 1987,
certain terms apparently were agreed to by Hydra and IMR,*fn3
including a purchase price of $2,650,000. The terms were
summarized in a telex that stated that they were subject to
approval by IMR's board of directors and the signing of a
formal Memorandum of Agreement (the "Agreement"). See DX 34 ¶¶
2, 7. The telex also provided: "Contract to be based on NSF 83
suitably ammended [sic]. Contract shall be in accordance with
standard S and P terms with logical ammendments [sic] for this
specific transaction. . . ." Id. ¶ 9. Payment of a ten percent
deposit was to be made either "upon signing contract or all
subjects lifted, whichever is later." Id. ¶ 2. Buyers were to
be entitled to nominate a delivery date and to place
representatives on board the vessel "once contract signed and
deposit lodged." Id. ¶¶ 4, 6.
On May 15, Lygren, acting through his power of attorney,
lifted the "subject to approval" condition. See DX 35.
Plaintiffs contend that a valid contract existed as of April
23, or, alternatively, as of May 15. However, the May 15 telex
included requests for a draft of the Agreement "for buyers
[sic] review and comments" and for further information
regarding such things as the identity of the registered owners
and whether the insurers had taken title to the ship and paid
all claims, liens and mortgages. See DX 34, 35.
On May 15, 1987, Jaross was informed by Nicholas Reisini,
Lygren's partner at LMS, that Lygren had bought the Friendship.
Jaross then sent a telex to Lygren, expressing both his
understanding that Lygren had been acting as AGR's broker for
the vessel and his surprise at Lygren's actions. See DX 37. On
May 18, Lygren sent a telex to Jaross denying that he and
Reisini had purchased the vessel. See DX 38.
Burbank submitted AGR's bid of $2.8 million to EWS on May 22,
stating that it understood that "the party to whom the [vessel]
was previously committed has not lodged a deposit." DX 41.
Shortly thereafter, Jaross raised his bid to $2,925,000, and
sent that bid directly to Hydra in Venezuela, as well as to EWS
in London. See DX 42, 43. On May 24, Jaross spoke to James
Gosling ("Gosling"), Hydra's London solicitor, who said that he
was unsure whether a Memorandum of Agreement had been signed or
was to be signed the following day.
Throughout the day of May 25, 1987, Lygren admittedly
continued to negotiate terms of the Agreement, which was signed
that evening. See DX 44, 45. Late that evening, London time,
Carla de Calderan ("de Calderan"), the President of Hydra,
placed a call from Venezuela to Jaross in London. The moving
defendants contend, and plaintiffs deny, that de Calderan told
Jaross that the Friendship was still available, and that she
had never received AGR's May 18 bid.
The next day, Jaross told Burbank to send copies of the May
18 bid to de Calderan in Venezuela. On May 27, Jaross spoke to
his New York counsel, Richard Jarashow ("Jarashow"), who
referred him to London counsel, P.T. O'Neill ("O'Neill").
O'Neill has stated under oath that he advised Jaross that if a
contract had been executed on the Friendship, Jaross should
withdraw his bid. Affidavit of P.T. O'Neill, sworn to on Feb.
14, 1990, at 1. O'Neill then spoke to Hydra's London attorney,
Gosling, was told of the executed Agreement, and withdrew AGR's
bid. Id. at 1-2. Jarashow had two conversations on May 27 with
Brendan O'Sullivan, Hydra's Florida counsel, the content of
which is disputed.
On May 28, 1987, Hydra notified ISC that it was cancelling
the Agreement, purportedly because ISC had not timely deposited
the requisite ten percent of the purchase price. See DX 48. On
May 29, at Jarashow's request, Gosling sent him a telex
confirming that the Friendship was available. See DX 49.
The events subsequent to the cancellation of the Agreement
need not be stated in detail, for although hotly contested by
the parties, they are not crucial to the Court's ruling today.
It is apparent that Jaross contacted defendants Bomar and T.
Peter Pappas ("Pappas") and informed them that the ship was
available. Ultimately, a deal was arranged whereby the ship was
purchased by Maryland Navigation Corporation ("Maryland"), a
Liberian corporation wholly owned by Pappas, as nominee for
Duke Petroleum Corporation, and a fee was paid to Bomar for
"flipping" the deal to Pappas.
Meanwhile, ISC had commenced legal proceedings against Hydra
in a London court. On June 1, the High Court of Justice,
Queen's Bench Division, Commercial Court, issued an injunction
enjoining Hydra and its agents from selling or delivering the
Friendship to any party other than ISC. Although a written
contract had apparently already been executed between Hydra and
Maryland, the June 1 closing in Tampa, Florida, was adjourned
after the parties received news of the injunction. However,
Hydra maintained that the injunction had no ...