In re Ecuadorian Oil Concession Litigation

487 F. Supp. 1364, 1980 U.S. Dist. LEXIS 9088
CourtUnited States Judicial Panel on Multidistrict Litigation
DecidedApril 24, 1980
DocketNo. 424
StatusPublished

This text of 487 F. Supp. 1364 (In re Ecuadorian Oil Concession Litigation) is published on Counsel Stack Legal Research, covering United States Judicial Panel on Multidistrict Litigation primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re Ecuadorian Oil Concession Litigation, 487 F. Supp. 1364, 1980 U.S. Dist. LEXIS 9088 (jpml 1980).

Opinion

OPINION AND ORDER

PER CURIAM.

This litigation consists of one action pending in the District of Delaware and one action pending in the Southern District of Florida. Texaco, Inc. (Texaco); its subsidiary, Texaco Petroleum Company (Texaco Ecuador); Gulf Oil Corporation (Gulf); and its subsidiary, Ecuadorian Gulf Oil Company (Gulf Ecuador) are the same four defendants named in both actions. Phoenix Canada Oil Company Limited (Phoenix) is the plaintiff in the Delaware action, and Norsul Oil and Mining Company, Ltd. (Norsul) is the plaintiff in the Florida action.

The Delaware action was brought by Phoenix in November, 1976. The Honorable Murray M. Schwartz, to whom the Delaware action has been assigned, has described the background and allegations of the complaint in the Delaware action as follows:

In 1961, Minas Y Petróleos del Ecuador (“Minas”), a wholly owned subsidiary of [Norsul], obtained a concession contract from the government of Ecuador for the exploration, development, and marketing of petroleum and natural gas deposits in Oriente Province, [the easternmost province in Ecuador, mountainous in nature and located about 300 miles from the shore]. Minas agreed to pay a royalty on each barrel of oil produced, to make substantial investments for development of the concession area, and to construct a pipeline and other facilities. Subsequently, Minas realized that it could not fulfill the financial and exploration requirements of the 1961 concession contract. As a consequence, in 1963 Norsul entered into an agreement with [Phoenix] under which [Phoenix] acquired a fifty percent interest in Minas in exchange for providing technical assistance and funds to defray preliminary exploration and maintenance costs.
In 1965, with the subsequent approval of the government of Ecuador, Minas on behalf of [Phoenix] and Norsul entered into a written agreement with the Ecuadorian operating subsidiaries of defendants Texaco and Gulf, the predecessors of defendants [Texaco Ecuador] and [Gulf Ecuador]. The subsidiaries were assigned the rights to develop a portion comprising approximately fifteen percent of the concession area in sole exchange for the assignor (“Minas”) reserving a two percent gross royalty interest in crude oil production from the assigned area.
Early in 1969, defendants publicly announced their first oil discovery in- the concession area. Ensuing reports within [1366]*1366trade circles indicated that the amount of reserves within the concession area were very substantial.
The information heretofore related does not appear to be seriously disputed by the parties. From this point onward, however, the parties’ versions are at variance. For purposes of evaluation, the succeeding account is derived largely from the Complaint. [Phoenix] claims defendants committed acts and omissions giving rise to three legal theories of recovery: (1) breach of contract; (2) unjust enrichment; and (3) intentional infliction of economic distress. As related by [Phoenix], the facts justifying legal recovery on these grounds are as follows.
Defendants are alleged to have starting in 1969 and continuing to the present “agreed upon, developed and implemented plans, schemes and a conspiracy to eliminate or impair [Phoenix’s] gross royalty interest, to destroy [Phoenix] as a going concern, to remove [Phoenix] as a competitor in Ecuador and elsewhere and to reap whatever financial benefits would flow therefrom . . ..” The alleged objective of defendants was either to reduce or eliminate the royalty interest or to enable the conversion by the Ecuadorian government of the royalty interest into taxes which could be credited on United States income tax returns.
Proceeding roughly in chronological order, [Phoenix] first avers defendants falsely and misleadingly claimed a discovery well was not located in the concession area and not subject to the two percent royalty. This matter was resolved after Norsul instituted a declaratory judgment action in federal court in New York by stipulation that the well was within the assigned area and Minas and its successors and assigns were entitled to a two percent royalty. [Phoenix] claims the publicity surrounding the incident caused it harm in the financial market.
In 1971, [Phoenix] and Norsul each obtained an individual one percent royalty interest from Minas. [Phoenix] avers that defendants subsequently, for the purpose of harassing and financially and physically wearing down [Phoenix’s] and Norsul’s resources, began to request documents purportedly to establish right and title to the gross royalty. [Phoenix] asserts that providing the “unnecessary documents” and attending meetings caused harm and that defendants were at all times fully aware of the validity of the royalty.
In 1972, a military government obtained power in Ecuador, replacing an elected civilian administration. Allegedly, at this point defendants falsely and maliciously began to publicly attack the original 1961 Minas concession agreement, terming it “piratical.” Later in 1972, defendants commenced royalty payments to the government of Ecuador based on a new “reference price” which was set pursuant to a Hydrocarbons Law established by Ecuador in October 1971. [Phoenix] claims at that time it was entitled to receive its gross royalty payment for the third quarter of 1972, as well as an accounting statement, but that neither was received when due. Thereafter, a series of delays and extensions was allegedly forced upon [Phoenix] under “implied threat.” Meetings were held and further delays were requested with respect to subsequent payments. Some delays were granted, but in at least one case [Phoenix] asserts it agreed to no delay. In early 1973, a new agreement was made, defendants allegedly having “extracted [Phoenix’s] consent to the . agreement and to repeated payment delays by economic duress.”
Allegedly, soon after the 1973 agreement, “substantially all of defendants’ senior officials and employees charged with defendants’ Ecuador affairs traveled to Quito, Ecuador to make further plans for the impairment of [Phoenix’s] gross royalty interest and the destruction of said interest and therewith of [Phoenix’s] business. During this period, defendants continued to fail and refuse to make any gross royalty payments to [Phoenix].”
[1367]*1367On February 26, 1973, [Phoenix] states it was advised by a Texaco official that gross royalty payments would be withheld until “further notice.” The ensuing publicity allegedly harmed [Phoenix] in the business community. Thereafter, on May 29,1973, the Ecuadorian government issued a decree imposing a retroactive 86% withholding tax exclusively on [Phoenix’s] and [Norsul’s] royalty interest. [Phoenix] claims that it was harmed by defendants because even though this tax would have reduced the amount of its royalty interest after 1972, it was deprived of the carrying value of the money it would have received if defendants had paid the royalty properly. [Phoenix] further declares its other investments in other countries were impaired due to the destruction in financial credibility and capability defendant allegedly caused.
In August 1973, a contract was formed between the Ecuadorian government oil company (“CEPE”) and defendants Texaco Ecuador and Gulf Ecuador.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

In Re Oklahoma Insurance Holding Co. Act Litigation
464 F. Supp. 961 (Judicial Panel on Multidistrict Litigation, 1979)
In Re Multidistrict Civil Antitrust Actions Involving the Distribution of Scotch Whiskey
299 F. Supp. 543 (Judicial Panel on Multidistrict Litigation, 1969)
In Re Insulin Manufacturing Antitrust Litigation
487 F. Supp. 1359 (Judicial Panel on Multidistrict Litigation, 1980)
In Re Raymond Lee Org'n Inc. Securities Litigation
446 F. Supp. 1266 (Judicial Panel on Multidistrict Litigation, 1978)
Phoenix Canada Oil Co. v. Texaco, Inc.
78 F.R.D. 445 (D. Delaware, 1978)
In re Penitentiary Postal Procedure Litigation
465 F. Supp. 1293 (Judicial Panel on Multidistrict Litigation, 1979)

Cite This Page — Counsel Stack

Bluebook (online)
487 F. Supp. 1364, 1980 U.S. Dist. LEXIS 9088, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-ecuadorian-oil-concession-litigation-jpml-1980.