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PROFILATI ITALIA v. PAINEWEBBER INC.

September 30, 1996

PROFILATI ITALIA S.r.l, Plaintiff, against PAINEWEBBER INC., Defendant.


The opinion of the court was delivered by: BATTS

 DEBORAH A. BATTS, United States District Judge.

 I. BACKGROUND

 In December 1992, Plaintiff entered into an agreement to pay $ 7,379,940.00 for the option to buy one hundred fifty thousand metric tons of aluminum for delivery at a rate of five thousand tons per month from July 1993 through December 1995, (Compl. PP 13-14), which amount was paid by February 1993. (Compl. P 15.)

 Prior to initiating the transaction, Profilati entered into two agreements: one with PaineWebber ("Counterparty Agreement") dated September 29, 1992, and another with PaineWebber International Futures Limited ("PWIFL") ("PWIFL Agreement"). (De Vos Aff. Exs. B. & C.) Neither agreement outlines the particulars of the aluminum transaction such as price or quantity. The purpose of the Counterparty Agreement was to outline "the conditions under which [the parties] will trade [London Metal Exchange] Futures and LME Options." (De Vos Aff. Ex. B.) Similarly, the PWIFL Agreement provided the "terms and conditions of doing business," (id. Ex. C at 1), specifically, it obligated PWIFL to perform the following services:

 
execution of transactions in Instruments as agent for [PaineWebber] on exchanges of which we are a member; transmission of your instructions and orders to [PaineWebber]; provision to you of information in respect to your positions which we receive from [PaineWebber]; and advice in relation to transactions in Instruments.

 (De Vos Aff. Ex. C P 1.)

 The Counterparty Agreement does not contain an explicit arbitration clause. *fn1" (De Vos Aff. Ex. B.) The PWIFL Agreement contains a clause stating that disputes arising under that agreement "will be resolved by arbitration under the rules of the SFA *fn2" or its successors." (De Vos Aff. Ex. C P 11.)

 The "Operation of Our Relationship" section of the PWIFL Agreement states that PWIFL acts as an agent of Defendant PaineWebber when Plaintiff provides PWIFL with trading instructions to be transmitted to PaineWebber. (Id. P 6.) Nothing in the PWIFL Agreement suggests that it governs the relationship between Plaintiff and Defendant PaineWebber. To the contrary, the agreement states that the agreement between Plaintiff and PaineWebber governs that relationship. *fn3" (Id. P 1.)

 An Agreement Letter from PWIFL to Plaintiff dated December 23, 1992, bore the heading "Confirmation of business between yourselves and PaineWebber Inc." (Id. Ex. G.) This Agreement Letter outlined the particulars of the aluminum transaction including timing of the aluminum deliveries, timing for the exercising of the option, price, quantity, and place of delivery. Dr. Leonardo Rossetto, the operational head, a director of the Plaintiff and on behalf of the Plaintiff, signed the Agreement Letter. (De Vos Aff. Ex. G; Underhill Aff. P 7.)

 On approximately August 26, 1993, Plaintiff was informed *fn5" that they would be required to make margin payments, regardless of the terms of the Amended Agreement Letter, or lose their option. (Compl. P 43.) Plaintiff paid $ 82,443.00 of the outstanding $ 435,000.00. Plaintiff alleges they made this payment under duress. (Compl. P 44.)

 PaineWebber International (UK) Ltd. ("PWUK"), in a letter dated September 20, 1993, demanded another margin payment of $ 193,671.00 from Plaintiff. (Compl. P 47.) The following day, PWUK sent a letter to Plaintiff stating that if payment of $ 193,671.00 was not received, it ...


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