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April 29, 2003


The opinion of the court was delivered by: Lewis A. Kaplan, United States District Judge


Plaintiff National Westminster Bank, Plc ("NatWest") brings this action to recover funds advanced to Grant Prideco, Inc. ("GPI"), a manufacturer of oilfield tubular steel products, as part of a trade barter agreement. Defendants GPI, Weatherford International, Inc. ("Weatherford"), GPI's former parent company, and Active Media Services, Inc. ("Active") move, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the complaint in its entirety. In the alternative, defendants GPI and Weatherford (the "GPI Defendants") move to stay the action pending joinder of Reliance Insurance Company of Illinois ("Reliance"), or its successor, as a necessary party pursuant to Fed.R.Civ.P. 12(b)(7) and 19.


A. The Agreements

The specific terms of the trade barter arrangement were contained in four agreements, three of which are dated March 17, 1998. Each agreement is described in turn.

1. Trade Finance Agreement

Under the Trade Finance Agreement, dated March 17, 1998, defendant Active agreed to issue GPI $4.65 million in trade credits in return for: (1) a $750,000 cash payment in connection with the sale of certain real property owned by GPI, and (2) a $1,243,542.33 cash payment from a $3,443,542.33 cash advance received by GPI from NatWest pursuant to a Trade Credit Cash Advance Agreement.*fn1

The Trade Finance Agreement obligated GPI to purchase certain goods and services through Active and Active's customers for a period of three years, provided the goods and services presented by Active were of equivalent quality and competitively priced with goods and services available to GPI from other sources.*fn2 As part of the Trade Finance Agreement, GPI agreed to comply with the terms and conditions of a Countertrade Consumption Procedure, pursuant to which GPI agreed to use its reasonable efforts to, inter alia, introduce Active to its qualified suppliers of goods and services and arrange and participate in meetings between Active and such suppliers to encourage the suppliers to accept partial payment in the form of trade credits.*fn3 Each time GPI purchased goods and services through Active, a percentage of the amount invoiced was to be designated by Active as the trade credit reduction amount.*fn4 GPI was to pay that amount directly to NatWest until NatWest was repaid $4.65 million.*fn5

2. Trade Credit Cash Advance Agreement

Pursuant to the Trade Credit Cash Advance Agreement ("Cash Advance Agreement") among NatWest, GPI and Weatherford as successor to EVI, also dated March 17, 1998, NatWest agreed to advance GPI $3,443,542.33 in consideration for which NatWest was entitled to receive cash payments from GPI generated by GPI's exhaustion of its trade credits.*fn6

In the event GPI or Weatherford as successor to EVI failed in any material respect to comply with the Cash Advance Agreement or the Trade Credit Payment Agreement (described below), or GPI materially breached its obligations under the Trade Finance Agreement, then, upon the occurrence and continuance of such default, NatWest was entitled to accelerate that part of the $4.65 million dollars outstanding and to receive payment of that amount from GPI or Weatherford.*fn7 Furthermore, the GPI Defendants agreed to indemnify and hold plaintiff harmless from and against any and all damages, losses, claims and costs, including attorneys fees suffered by NatWest in the event of an event of default and to pay to NatWest interest on that part of the $4.65 million outstanding.*fn8

3. Trade Credit Payment Agreement

Pursuant to the Trade Credit Payment Agreement, dated March 17, 1998, GPI and Active agreed, inter alia, that GPI would pay all amounts designated by Active as trade credit amounts directly to NatWest.*fn9

4. Insurance Policy

Pursuant to the Cash Advance and Trade Finance Agreements, Active purchased a trade credit insurance policy (the "Policy") from Reliance.*fn10 The Policy provided coverage to indemnify NatWest as "loss payee" for any loss it incurred in the event GPI, the "insured," despite compliance with its agreements, was unable to purchase sufficient goods and services to generate the requisite amount of trade credits to retire the amount due NatWest by the end of the term.*fn11 The Policy excludes coverage for any loss due to GPI's failure to perform any material obligations set forth in the Countertrade Consumption Procedure, annexed to the Trade Finance Agreement.*fn12 The Policy provides further that a claim under the Policy is to be supported by certification from both Active and GPI that GPI fulfilled its obligations under the Countertrade Consumption Procedure and a letter from an independent accounting ...

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