# Petition for Writ of Certiorari — Standard Fruit Co. v. Republic of Nicaragua

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 1992
- **Citation:** 503 U.S. 919

## Text

7

Supreme Court, U.S.

‘61-1154 FILED_
MAM 1S 1992

No. {
ame scientist

[a

IN THE

Supreme Court of the United States
OCTOBER TERM, 1991

STANDARD FRUIT COMPANY,
STANDARD FRUIT AND STEAMSHIP COMPANY,
and CASTLE & COOKE, INC.
Petitioners,
v.

REPUBLIC OF NICARAGUA,
Respondent.

Petition for Writ of Certiorari to the United States
Court of Appeals for the Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

STEVEN M. SCHNEEBAUM
Counsel of Record

CHARLES E. TALISMAN

G. KENDRICK MACDOWELL
PATTON, Boccs & BLow
2550 M Street, N.W.
Washington D.C. 20037
(202) 457-6000

Attorneys for Petitioner

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

QUESTIONS PRESENTED

1. Whether an appellate court may review de novo a
district courts’ factual findings, made pursuant to the
Federal Arbitration Act, 9 U.S.C. § 4, that the sig-
natories to a Memorandum of Intent did not enter
into a binding arbitration agreement.

2. Whether Prima Paint v. Flood & Conklin Mfg. Co.,
- 388 U.S. 395 (1967) requires a trier of fact, in de-
termining whether ambiguous language in a Memo-
randum of Intent created a binding arbitration
agreement, to sever the arbitration language from its
context and reject consideration of surrounding terms,
the nature of the document, and other extrinsic evi-
dence of the parties’ intent.

ii

TABLE OF CONTENTS

Page
GUTS PIGS PIRMMOURE LURE? scssecincizsastidscrsersessntesaseivess i
TARAS OF ALFIE EIED céintssisdcineiaeens ili
CTR ES TEAETT sncsicnsessriscasseinineeenaas 2
FAs REITs RIDES cn ctasninnsasenceesierescensaseemaanaae 2
TEXT OF STATUTES AND RULES .....................008
STATEMENT OF THE: CARE sesscccssscescecsccssevsesnecececes 5)
REASONS FOR GRANTING THE WRIT .................. 13

I. The Panel Violated Settled Federal Proce-
dure and Split with Other Circuits by Re-
viewing De Novo the District Court’s Factual
Findings Concerning the Existence of a
Binding Arbitration Agreement ................... 14

II. The Panel Misconstrued Supreme Court
Precedent and Distorted Federal Arbitration
Law by Severing Ambiguous Arbitration
Language from Its Context in a Preliminary
Document and Mandating Arbitration De-
spite the District Court’s Factual Finding
That the Parties Never Intended to be

BONING nccsccrsncevncnsasesoscenunieeicaltasabanlanetias 22
CORNICE ATION onnvinsssverssiscnnssnnapseeneeunepbianeneentnaaaaes 28
APPTEINGIER, cccsvccsssscnnsscsensinccenssentsopeenanteneasaiebdenaaes la

Opinion of the United States Court of Appeals
for the Ninth Circuit, 987 F.2d 469 ............... la

Memorandum Opinion of Judge John J. Vuk-
asin, Jr., of the United States District Court
for the Northern District of California .......... 27a

Memorandum Of TnGent ..ccccscoccscscsccovcssetccsscsers 49a

iil

TABLE OF AUTHORITIES

Cases: Page

Anderson v. Bessemer City, N.C., 470 U.S. 564
NEE Sodikatchiakindsenias Es cabebameahacsiekiiakiwaate Scie wekekaiens 18

AT&T Technologies, Inc. v. Communications Work-
SR MGR, MEE CAUMEMED scccncccsesnasessonnsesccssess 23,27,29

Drake Bakeries, Inc. v. Local 50, Am. Bakery &
Confectionery Wkrs. Int’l, 370 U.S. 254

NT ndacncinnssentbsesnenessuatudensonsss 66

the arrangement contemplated [t]hereunder”’ ‘“‘will be re-—
ferred to arbitration in London, England, according to the
rules of the London Arbitration Association’? was changed
to provide for only “‘mutually agreed mechanisms or pro-
cedures such as the rules of the London Arbitration As-
sociation.”

24. The Memorandum of Intent established the concep-
tual guidelines under which Standard Fruit would return
to Nicaragua and start to negotiate commercial contracts
with the Nicaraguan government. It was not itself one of
those contracts.

25. The Memorandum of Intent contemplated that the
following documents or contracts would subsequently be
negotiated and executed: documents effectuating Nicara-
gua’s purchase of Standard Fruit shares in the banana
production societies “under mutually agreeable condi-
tions’; documents effectuating Nicaragua’s purchase of
Standard Fruit’s assets at a price to be determined; a
fruit purchase contract; and a technical assistance contract.

26. The reference in the Memorandum to Nicaragua’s
purchase of Standard Fruit’s shares in the production part-
nerships ‘‘under mutually agreeable conditions,’ pertains
to the requirement, under Nicaraguan law, that the ap-
proval of the other partners be obtained before the shares
could be transferred.

27. The Memorandum of Intent contemplated that after
the preexisting contracts to which Standard Fruit was a
party were resolved, Standard Fruit, a nonsignatory to
the Memorandum, would in the future enter a contract
with the ‘‘competent national entity’’ for the purchase of
all bananas produced on the acreage in cultivation at the
time of the ‘Programa Bananero del Occidente.”’ The
Memorandum contemplated that the contract would be for
the term of five years (without specifying starting or end-
ing dates) and would set forth a price of $4.30 per box
F.0.B. Nicaraguan port of loading for first-quality fruit.

— <UL

33a

The price of other-quality fruit was to be negotiated later.
The Memorandum also contemplated that the fruit pur-
chase contract would provide or a set off of 50¢ per box
for the amortization of loans and purchase of assets and
25¢ per box for Standard Fruit’s provision of technical
Services, pursuant to a separate technical services contract.

28. The Memorandum stated that the execution of a
fruit purchase contract was not an automatic event. Such
a contract would be executed only “following the official
resolution without claim or damage of preexisting con-
tracts which might be thought to conflict therewith” and
after or together with the completion of a technical as-
sistance contract.

29. The signatories of the Memorandum understood that
“preexisting contracts” referred at least in part to Stand-
ard Fruit’s contracts with its Nicaraguan partners and the
partnerships which would conflict with any contract by
which Standard Fruit would purchase fruit from anyone
else, such as the “competent national entity.”

30. Paragraph VII of the Memorandum contemplated
that Standard Fruit would provide and be compensated
for technical assistance pursuant to a separate technical
assistance contract to be negotiated in Nicaragua. No such
technical assistance contract had ever been signed, nor was
Standard Fruit willing to conclude such a contract without
simultaneously obtaining a fruit purchase commitment.

31. Paragraph IV of the Memorandum of Intent states:
‘‘Any and all disputes arising under the arrangements con-
templated hereunder, should same not be able to be settled
amicably settled [sic] by the parties, will be referred to
mutually agreed mechanism or procedures of international
arbitration, such as the rules of the London Arbitration
Association.”” The phrase “arrangements contemplated
hereunder” referred to the legal documents subsequently
to be negotiated, executed, and performed in Nicaragua.
The parties intended that all subsequent contracts called

34a

for by the Memorandum would have arbitration clauses,
pursuant to Paragraph IV.

32. The following are some examples among many of
language in the Memorandum of Intent which reveals both
the tentative nature of the document and the parties’ as-
sumption that contractual relationships would result only

at a later time and upon the occurrence of certain specified
events.

a. The document is titled ‘‘Memorandum of Intent.’’

b. Its preamble states that the parties have agreed only
“in principle.”’

c. In Article VII, entitled ‘‘Basic Operational Aspects
of Production,’ the Memorandum states that the Gov-
ernment of Nicaragua and Standard Fruit ‘‘shall enter
a contract (following the official resolution without claim
or damage of preexisting contracts which may be
thought to conflict therewith) ... for the purchase of
all bananas ...’’ [Emphasis supplied.] That provision
further states that the fruit purchase contract ‘shall
be”’ entered into with a competent national entity, which
“shall’’ in turn contract with the production societies.

d. In Article VIII, the Memorandum states:

The parties agree that in accordance with the
spirit of compatibility and cooperation evidenced
during the negotiations hereinabove memorialized,
the Government of Nicaragua and Standard Fruit
will take all such further actions and execute and
deliver all such applications, decrees, documents
and/or other papers as are necessary to the full
accomplishment of the aims expressed herein.
(Emphasis supplied.)

33. About a week after January 11, 1981, Mr. Sousane
returned to Nicaragua and operated on the assumption
that the fruit purchase contracts and the technical assist-

35a

ance contract would eventually be concluded. A few em-
ployees were brought back into the country. No employees
had been terminated, so none needed to be rehired.

34. About a week after January 11, 1981, Standard
Fruit returned to Nicaragua, started negotiating the fruit
purchase and technical assistance contracts, and began
working with Nicaragua to achieve the transfer of Stand-
ard Fruit’s partnership shares. In the meantime, Standard
Fruit bought all first-quality bananas at $4.30 per box,
provided technical assistance in connection with the grow-
ing of bananas, and deducted 50¢ per box for amortization
of debt and 25¢ per box for the technical assistance. In
those respects, Standard Fruit operated ‘‘as though” the
contracts whose negotiation was beginning were already
in force.

35. Standard Fruit’s conduct pending execution of im-
plementing contracts was based not on its understanding
that the Memorandum was a contract requiring it to return
to Nicaragua immediately, but on a good faith desire to
further the interest of all parties involved.

36. Standard Fruit’s 1981-82 internal budget report
Stated that “ ‘the good faith’ document signed in San
Francisco presumably will allow us to operate effectively
here for at least another two years.”

37. A telex from Nicaragua’s Washington lawyer, Wil-
liam Rogers, Esquire, a few days after the execution of
the Memorandum of Intent, reveals the following contem-
poraneous (and clearly correct) interpretation of the Mem-
orandum:

The Memorandum of Intent contemplates that
Standard Fruit will resume its traditional position
in the Nicaraguan Industry, and that Nicaragua
and Standard Fruit will sign a new contract, after
preexisting contracts are resolved. ... That new
contract has not yet been signed.

36a

38. After January 11, 1981, certain of C&C’s public
statements, such as press releases, annual reports, and
SEC filings, refer to the document signed on January 11,
1981 as a “final agreement.” This terminology is consist-
ent with the view of C&C and Steamship signatories that
the Memorandum of Intent effected a final resolution of
the “‘basic principles’’ which were to govern new contrac-
tual relationships.

39. C&C’s form 10-K for the period ending June 20,
1981 stated that C&C and Nicaragua have entered into a
“general agreement that should ensure a continuation of
normal business operations in Nicaragua.’’ (Emphasis sup-
plied.) The form states that the general agreement

will be implemented through a five-year purchase
contract for purchase of banana production by
the Company and purchase of the Company’s as-
sets by the Government of National Reconstruc-
tion of the Republic of Nicaragua. Another
contract contemplated in the general agreement
provides for a continuation of technical assist-
ance. Both this latter contract and the purchase
contract are being finalized.

40. After January 11, 1981 and until October 25, 1982,
Standard Fruit and Nicaraguan officials engaged in ne-
gotiations regarding the contracts contemplated in the
Memorandum of Intent. During the period, draft contracts
were frequently exchanged.

41. Standard Fruit first presented a draft agreement
reiterating most of the conditions contemplated in the
Memorandum of Intent.

42. Nicaragua responded with four draft contracts: a
draft fruit purchase agreement, a draft technical assistance
agreement, a draft contract for purchase and sale of
Standard Fruit’s assets and Nicaragua’s assumption of the

37a

partnerships’ debts, and a general draft contract between
the Government of Nicaragua.

43. Like Standard Fruit’s initia] draft, Nicaragua’s gen-
eral draft contract contained provisions reiterating or sim-
ilar to many of the general agreements in principle
established in the Memorandum of Intent. This suggests
that neither party felt it was already contractually bound
to those provisions.

44. All of the fruit purchase and technical assistance
contract drafts exchanged during the entire period of ne-
gotiations contained arbitration clauses. These clauses dif-
fer markedly from the language in Article IV of the
Memorandum of Intent. For example, the early drafts of
the technical assistance contract, the fruit purchase con-
tract, and the general agreement specified the scope of
the arbitration clause as covering ‘any disputes arising
out of the interpretation and enforcement of this Agreement
and out of the legal instruments wmplementing it.’’ A later
draft fruit purchase contract defined the arbitration
clause’s scope to cover ‘‘any dispute, difference of opinion
or claim which may arise out of or be related to this
Contract, its interpretation or its nonfulfillment, termi-
nation or invalidity ...”

45. One arbitration clause proposed by Nicaragua pro-
vides for submission of the dispute to a referee or arbi-
tration in accordance with the rules of the Inter-American
Commercial Arbitration Commission.

46. In the first draft contracts, Nicaragua’s proposals
frequently departed from the terms discussed in the Mem-
orandum of Intent that Nicaragua now argues were bind-
ing in all respects. For example, Nicaragua’s draft fruit
purchase agreement included a provision under which the
five-year term could be shortened if the debt owed to
Standard Fruit was fully amortized in a shorter time. In-
stead of providing for a 25¢ per box deduction for technical
assistance, the Nicaraguan technical assistance contract

38a

draft proposed an annual cap of $1.5 million. Instead of
providing for deductions on all bananas purchased by
Standard Fruit, Nicaragua proposed that the deductions
be allowed only for first-quality bananas, although Nica-
ragua took the position (contrary to what its witnesses
testified) that Standard Fruit was obligated to purchase
second-quality fruit as well.

47. In a later proposal, Nicaragua attempted to reserve
the option to sell bananas on a C.I.F. basis, even though
the Memorandum of Intent specified that the price in the
fruit purchase contract would be F.0.B.

48. The last complete fruit purchase contract draft pre-
pared eights months after the Memorandum reveals un-
resolved disputes over the price of second-quality fruit,
compensation for fruit not packed, premiums for first-qual-
ity fruit, failure to obtain 90% of the required minimum
number of boxes of bananas, and many other terms.

49. At the time the Memorandum was signed, no entity
of the Nicaraguan government held title to any bananas.
Nicaragua had not acquired bananas to sell from the par-
ties who owned them.

50. Nicaragua did not at any relevant time enter into
a contract with the production societies to purchase their
bananas for resale to defendants.

51. Standard Fruit and Nicaragua never signed a tech-
nical assistance contract, nor did they execute documents
establishing the government’s assumption of the partner-
ship debt.

52. Despite the efforts of Nicaragua and Standard Fruit,
the consent required of all of the partners to authorize
Standard Fruit’s transfer of its shares to Nicaragua was
never obtained.

53. No evidence was presented to suggest that Standard
Fruit’s preexisting lease and fruit purchase contracts with

39a

its partners and with the production societies ever were
officially resolved.

54. On October 25, 1982, when Standard Fruit ceased
its banana growing and purchasing activities in N icaragua,
Standard Fruit and Nicaragua had neither finalized nor
signed the fruit purchase contract they had been negoti-
ating.

55. The issues now before this Court arose in or before
October 1982, when Standard Fruit left Nicaragua. From
October 1982 until November 3, 1986, Nicaragua made no
written demand for defendants to submit to arbitration.
When Nicaragua finally sought a forum to resolve its dis-
pute, it selected this Court and filed a Complaint on Oc-
tober 25, 1986, which neither requested nor even
mentioned arbitration. Even after amending its Complaint
to preserve an option to arbitrate, Nicaragua did not com-
mit to that option until December 31, 1986 when
defendants moved to dismiss the bulk of its claims and
filed substantial counterclaims.

B. Conclusion from the Facutal Findings

(i) Is the Memorandum of Intent a Contract?

56. As the trier of fact, the Court finds that plaintiff
has failed to show by a preponderance of the evidence that
the Memorandum of Intent was a contract.

°7. On balance, the testimony of defendants’ witnesses
that he Memorandum was not intended as a binding con-
tract is credible and consistent with the document’s lan-
guage, the surrounding circumstances, and the parties’
contemporaneous conduct. The court finds the testimony
of plaintiff's witnesses that the Memorandum was intended
aS a contract to be less credible and consistent.

98. The history of negotiations prior to January 11, 198]
Suggests that the parties were discussing only “‘basic prin-

40a

ciples’’ and were not making contractual commitments.
Further, the evidence shows the clear understanding of
the negotiators present at the San Francisco meetings that
final contracts would be concluded in the future by Stand-
ard Fruit, a nonsignatory to the Memorandum of Intent,
after, inter alia, the resolution of existing contracts with
third parties and the consent of third parties to critical
elements of the proposed new structure.

59. There is no evidence that contracts for the sale and
purchase of bananas or other fruit products has ever been
negotiated by the highest level government officials of any
nation and the most senior officers of a corporation or a
parent corporation. As a plaintiff witness testified, if the
parties were “... negotiating a commercial contract ...”’
there was no need to have members of the junta, two
ministers, to sign the Memorandum of Intent. This, in and
of itself, supports the contention that the Memorandum of
Intent was not a contract for the sale and purchase of
bananas but rather was an agreement to agree.

60. Of great significance is the fact that officers of
Standard Fruit were present and participated in the meet-
ing of January 9-11, 1981 but did not sign the Memoran-
dum of Intent. Thus, the company that had been the
purchaser of bananas and would be transferring its shares,
selling its assets, providing technical assistance, and buy-
ing and selling bananas under the contemplated new struc-
ture, was not a signatory. This can only lead to the
conclusion that the Memorandum of Intent was not a pur-
chase agreement or a contract to purchase but was a state-
ment of ‘‘political willingness to have Standard Fruit come
back to Nicaragua’ and a statement which would lay the
broad ground rules for the anticipated contract between
the Republic of Nicaragua and the eventual purchaser of
bananas.

61. The Memorandum of Intent is replete with language
indicating its preliminary nature. It significantly lacks lan-

4la

guage acknowledging contractual status, which supports
the conclusion that the Memorandum is not a binding con-
tract. In several instances, language in the drafts of the
Memorandum of Intent was softened at Nicaragua’s re-
quest. These changes suggest that no contractual com-
mitments were being made.

62. A general draft contract submitted by Nicaragua
after January 11, 1981, incorporating the provisions of the
Memorandum of Intent, presumably to be signed by Stand-
ard Fruit and a competent national entity, evidences Nic-
aragua’s contemporaneous perception that the
Memorandum of Intent itself was not a binding contract.

63. Based on all of the foregoing, the Court finds that
the Memorandum reflected a mere agreement to agree.
The Memorandum of Intent was not a contract under which
disputes must be submitted to arbitration.

(ii) Does Paragraph IV of the Memorandum Evi-
dence an Agreement to Arbitrate?

64. Although the Court’s finding that the Memorandum
was not a contract renders the remaining issues regarding
arbitration moot, the Court will address the second issue
of whether Paragraph IV of the Memorandum of Intent
evidenced a present agreement to arbitrate certain dis-
putes. The Court finds that it did not.

65. The language of the Memorandum itself, contem-
plating future arrangements which required the active par-
ticipation of nonsignatories, the identity of those who
signed the documents, and the lack of specificity in the
arbitration clause itself, compel the Court’s conclusion that
the Memorandum of Intent does not contain a present
agreement among the signatories to submit to arbitration,
but rather contains a provision declaring the expectations
of the parties that contracts to be negotiated later would
include agreements to arbitrate. This interpretation is am-

42a

ply supported by the clause’s principal draftsman, Robert
M. Moore, and by his counterpart, Norton Tennille.

66. The fact that all drafts of the fruit purchase and
technical assistance contracts presented by both parties
after January 11, 1981 included arbitration clauses also
supports the view that the language in Paragraph IV of
the Memorandum reflected the parties’ intent that all con-
tracts negotiated pursuant to the Memorandum would con-
tain arbitration clauses. Had Nicaragua intended Paragraph
IV of the Memorandum to be binding, there would have
been no need to include arbitration clauses in its drafts
of the fruit sales or technical assistance contracts.

67. Finally, Nicaragua’s failure to demand arbitration
from October 1982 through the time the Complaint was
filed evidences Nicaragua’s understanding that no agree-
ment to arbitrate had been concluded.

C. Do the Disputes Before the Court Fall Within
the Scope of Any Agreement to Arbitrate?

68. Even if the parties entered a valid agreement to
arbitrate, plaintiff has failed to show by a preponderance
of the evidence that the interpretation or enforcement of
the Memorandum of Intent is within the scope of that
agreement.

69. The Court finds Mr. Moore’s testimony that the
word ‘‘arrangements” in Paragraph IV meant the con-
tracts contemplated in the Memorandum to be credible and
authoritative. Therefore, the phrase in Paragraph IV of
the Memorandum, ‘disputes arising under the arrange-
ments contemplated hereunder,’ could at best encompass
only disputes relating to the interpretation or performance
of any contracts to be made by the parties which were
“contemplated” in the Memorandum of Intent, such as the
contracts for fruit sales, technical assistance, asset sales,
and sales of partnership interests. Those final contracts
contemplated were never concluded. Therefore, no dis-

43a

putes, including the disputes before this Court, can have
arisen under them.

II. CONCLUSIONS OF LAW

A. Plaintiff’s Motion to Compel Arbitration

1. This hearing was held pursuant to the United States
Arbitration Act, 9 U.S.C. § 4, which provides that when
the making of an agreement to arbitrate is in dispute, the
Court shall proceed summarily to the trial of that issue.

2. In order for Nicaragua to prevail on its motion to
compel arbitration, it must demonstrate three things: first,
that Nicaragua and defendants entered into a contract:
second, that the contract included an agreement to arbi-
trate disputes; and third, that the disputes covered by the
arbitration agreement included those which are before the
Court. 9 U.S.C. §1 et seq .; Pollux Marine Agencies, Inc.,
v. Louis Dreyfus Corp. 455 F. Supp. 211 (S.D.N.Y. 1978):
AT&T Technologies, Inc. v. Communications Workers of
America, 475 U.S. 643, 651, 106 S. Ct. 1415, 1420 (1986);
French v. Merrill Lynch, Pierce, Fenner & Smith Co., Inc.,
784 F.2d 902, 908 (9th Cir. 1986).

3. The first issue before the Court is whether the Mem-
orandum of Intent is a contract. Since the arbitrator can
derive his power only from a contract when a party chal-
lenges its existence, the Court must decide whether there
is a contract between the parties. Sigety v. Axelrod, 535
F. Supp. 1169, 1172 (S.D.N.Y. 1982); Schacht v. Beacon
Ins. Co., 742 F.2d 386, 389-90 (1984).

4. A mere “agreement to agree” is not a contract and
has no legal force. Alaimo v,. Tsunoda, 215 Cal. 2d 94,
97; 29 Cal Rptr. 806, 807 (Ist Div. 1963). Carter v. Mile-
stone, 170 Cal. App. 2d 189: 338 P.2d 569, 571 (2d Dist.
1959).

o. If a contract exists, it is the Court’s responsibility
to interpret it to the extent of determining whether the

44a

parties intended to arbitrate any disputes regarding it.
AT&T Technologies, Inc. v. Communications Workers of
America, 475 U.S. 648, 651, 106 S. Ct. 1415, 1420 (1986);
Howard Electric v. Frank, 754 F.2d 847, 850 (9th Cir.
1985).

6. The arbitration provisions of a purported agreement
must be interpreted in their context rather than alone.
Georgia Power Co. v. Cimarron Coal Corp., 526 F.2d 101,
106 (6th Cir. 1975), cert. denied, 425 U.S. 952 (1976).

7. Even if the parties agreed to arbitrate some disputes,
the Court cannot compel the parties to arbitrate issues
not within the scope of an arbitration agreement. F’rench
v. Merril Lynch, Pierce, Fenner & Smith Co., Inc., 784
F.2d 902, 908 (9th Cir. 1986); Weyerhauser Co. v. Western
Seas Shipping Cv., 568 F. Supp. 1220, 1222 (N.D. Cal.
1983), affd, 743 F.2d 635 (9th Cir.), cert. denied, 469 U.S.
1061 (1984).

8. The words “arising under’ when used in an arbitra-
tion provision are generally construed as intended tu cover
a narrow scope of disputes. Mediterranean Enterprises,
Inc. v. Ssangyong Corp., v. 708 F.2d 1458, 1464 (9th Cir.
1983). The Court has found as a matter of fact that the
parties agreed only that subsequent contracts would con-
tain arbitration clauses and did not in the Memorandum
agree to arbitrate questions of its interpretation.

9. Because this Court has found as a factual matter that
the Memorandum of Intent is not a contract, plaintiff's
motion to compel arbitration must be denied. Alternatively,
plaintiff's motion must be denied because the Court has
found as a matter of fact that the parties did not enter
into a present agreement to arbitrate; and/or that the
parties did not agree to arbitrate the type of disputes
presently before this Court.

10. Count I of plaintiff's Amended Complaint must he
dismissed by virtue of plaintiff’s failure to establish by a

45a

preponderance of the evidence that the disputes before the
Court must be arbitrated.

B. Standard Fruit’s Motion for Summary Judgment

11. In order for-defendant Standard Fruit Company to
prevail on its motion for summary judgment, it must dem-
onstrate that there is no genuine issue of material fact

and that it is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56.

12. Because the Memorandum of Intent does not ex-
pressly make Standard Fruit Company a party and nobody
signed expressly on behalf of Standard F ruit, a prima facie
case has been made that Standard Fruit is not bound
thereby whatever the legal force of the Memorandum. A
corporate subsidiary is not bound by the mere fact that
its parent has executed a document. Interocean Shipping
Co. v. National Shipping and Trading Corp., 523 F.2d
527, 539 (2d Cir. 1975), cert. denied, 423 U.S. 1054 (1976).

13. The law does not presume an agency relationship.
It is plaintiff's burden to establish facts sufficient to es-
tablish a dispute whether the officials signing the Memo-
randum of Intent were acting as Standard Fruit’s agents
or that some action by Standard Fruit reasonably led Nic-
aragua to believe they were so acting. Myers v. Stephens,
233 Cal. App. 2d 104, 43 Cal. Rptr. 420 (1st Dist. 1965);
Barclay Kitchen, Inc. v. California Bank, 208 Cal. App.
2d 347, 25 Cal Rptr. 383 (2d Dist. 1962); Keepelman v.
Hevkes, 111 Cal. App. 2d 475, 245 P.2d 54 (1952).

14. Nicaragua has presented no facts on which an in-
ference of actual or ostensible agency could be based.
Standard Fruit therefore is not a party to the Memoran-
dum, is not bound by it, and is entitled to judgment as a
matter of law.

C. The Remaining Defendants’ Motion for Summary
Judgment

15. In order to prevail on their motion for summary
judgment, the remaining defendants must establish that

46a

no issue remains as to any material fact relating to Count
II and that they are entitled to judgment as a matter of
law. Fed. R. Civ. P. 56.

16. The transaction alleged by Nicaragua is a transaction
in goods, Cal. Com. Code § 2102, evidenced by a document
signed in California. The transaction thus bears ‘“‘an ap-
propriate relationship to this state’ within the meaning of
Cal. Com. Code § 1105, Cal. Code Comment ¢ 3 (West’s
1964 and 1986 Supp.) and the California Commercial Code
governs this dispute.

17. Writings which look toward some future contract
but which do not evidence an existing contractual rela-
tionship do not satisfy the U.C.C. Statute of Frauds, Cal.
Com. Code § 2201. Conaway v. 20th Century Corp., 29
U.S.C. Rep. 1387, 1392-93 (Pa.1980); Dataserve Equip-
ment, Inc. v. Technology Finance Leasing Corp., 364 N.W.
2d 838 (Minn. App. 1985)

18. The plain meaning of Article VII of the Memoran-
dum of Intent is that a five-year fruit purchase contract
was to be concluded between Standard Fruit and a com-
petent Nicaraguan national entity at a later time after the
occurrence of certain specified events, including the official
resolution of preexisting contracts with the growers and
production societies. The Memorandum repeatedly states
that Standard Fruit and the competent national entity
“shall” enter into a contract and the purchase price ‘“‘will
be”’ $4.30 per box of first-quality bananas. Moreover, there
are a significant number of matters relating to the pur-
chase and sale of bananas reserved both explicitly and
implicitly in the Memerandum of Intent for subsequent
negotiation. The express terms of the Memorandum of
Intent thus show that a purchase-sales contract would re-
sult only at a later time and after the occurrence of certain
specified events and therefore does not establish that a
“contract for sale has been made’’ pursuant to Cal. Comm.
Code § 2201(1). See also Cal. Com. Code § 2204.

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47a

19. Plaintiff has taken the position that the Memoran- -
dum of Intent represents a binding contract. In light of
that position, the parol evidence rule would prevent the
introduction of testimony of a contemporaneous oral agree-
ment which contradicts the express language of the doc-
ument. Cal. Com. Code § 2202; Enrico Farms, Inc. v. H
J. Heinz, 629 F.2d 1304, 1306 (9th Cir. 1980); Schwartz
v. Shapiro, 229 Cal. App. 2d 238, 40 Cal. Rptr. 189 (1st
Dist. 1964).

20. The testimony of plaintiff's witnesses that on Jan-
uary 11, 1981, they believed that they were signing a
contract which contained immediately effective, uncondi-
tional obligations to purchase and sell fruit for a five-year
period contradicts the unambiguous language of the Mem-
orandum of Intent. Such testimony, therefore, may not
serve to create a genuine issue of material fact within the
meaning of Fed. R. Civ. P. 56. Cal. Com. Code § 2202.

21. Because the Memorandum of Intent itself is not a
final five-year fruit purchase contract, a five-year com-
mitment to buy and sell bananas cannot be established by
defendant’s alleged 22-month course of conduct. Even if
the parties bought and sold bananas for 22 months on
terms consistent with the Memorandum of Intent, as a
matter of law this can only establish a contract covering
that time in which performance was rendered. Cal. Com.
Code § 2201(3\Xc).

22. There remains no genuine issue as to any material
fact bearing on whether the Memorandum of Intent is a
five-year contract for the purchase and sale of bananas as
alleged in Count II of the Amended Complaint. Yet it is
only such a five-year contract that defendants stand ac-
cused of having breached.

23. Defendants have therefore established that they are
entitled to judgment on Count II as a matter of law.

DATED: April 13, 1988

48a

/s/J.P. VUKASIN, JR.

J.P. VUKASIN, JR., JUDGE
UNITED STATES DISTRICT COURT

49a

MEMORANDUM OF INTENT

This Memorandum of Intent entered into this 11th day
of January, 1981, by and between the Government of Na-
tional Reconstruction of the Republic of Nicaragua (‘‘Gov-
ernment of Nicaragua’”’) and Standard Fruit and Steamship
Company and its parent company, Castle and Cooke, Inc.
(both of which are collectively referred to as ‘Standard
Fruit’’), confirms the understanding reached by the parties
concerning the continued participation by Standard Fruit
in the banana industry of Nicaragua.

WHEREAS, the aforementioned parties recognize the
need to establish and maintain a social, political, and eco-
nomic environment conducive to the viability and long-term
stability of the banana program in Nicaragua; and

WHEREAS, the Government of Nicaragua is dedicated
to solving the serious and urgent social problems affecting
the labor force participating in this important agricultural
activity while providing an economically viable and realistic
framework fof the Nicaraguan banana program; and

WHEREAS, the Government of Nicaragua considers
that the main objectives of the decree adopted on Decem-
ber 21, 1980 concerning the banana program can be
achieved, and the spirit of that decree fostered, by the
arrangements described below, to the mutual benefit and
satisfaction of the parties and of the Nicaraguan laborers
and producers;

NOW, the undersigned after full and frank discussion
and negotiation and reflecting mutual confidence in their
future relationship, have agreed in principle that Standard
Fruit will continue in the banana business in Nicaragua
based upon the undertakings, and subject to the terms and
conditions, set forth below:

IT.

Il.

50a

Participation in Equity:

The Government of Nicaragua agrees to purchase
Standard’s shares in the production societies under
mutually agreeable conditions.

Acquisition of Assets and Debt Repayment Sched-
ule:

The Government of Nicaragua recognizes, con-
firms and assumes responsibility for and the re-
payment of the advances and receivables due
Standard Fruit, as shown on Standard Fruit’s
books, and will purchase the assets of Standard
Fruit, as described on the annexed exhibit, which
shall, however, be subject to audit and evaluation
according to generally accepted accounting and
evaluation principles and shall be amended as to
amount to reflect conditions as of the date hereof.
Such advances and receivables shall be paid and
assets be purchased with funds generated by the
set off against purchase price described in Section
VII.

Working Environment:

The Government of Nicaragua agrees to cooperate
in the establishment of an appropriate working
environment for Standard Fruit, particularly in
reference to:

a) The solution of labor controversies within the
framework of Nicaragua’s labor legislation.

b) The fostering of objective appraisals of the com-
pany’s operations, by official agencies dealing
with the media.

c) The assurance of safe passage (for legitimate
business purposes) in and out of Nicaragua and
Nicaraguan ports, of Standard Fruit’s employ-
ees, vehicles and vessels, and the quiet enjoy-
ment by Standard Fruit of a normal business
presence. ;

IV.

Vi.

VIL.

Arbitration:

Any and all disputes arising under the arrange-
ments contemplated hereunder, should same not
be able to be settled amicably settled by the par-
ties, will be referred to mutually agreed mecha-
nisms or procedures of international arbitration,
such as the rules of the London Arbitration As-
sociation.

Insurance of Investment:

Standard Fruit makes note of the fact that it has
in effect a policy of insurance from OPIC covering
a portion of its investment in Nicaragua. Standard
Fruit enters into this agreement with the under-
standing that such action will not adversely affect
its current confirmation thereof. The Government
of Nicaragua shall cooperate with Standard Fruit
and use its best efforts to assist Standard Fruit
in the latter’s efforts to obtain additional insurance
(from OPIC or such other governmental agency
as is mutually agreed upon).

Treatment of Claims:

The Government of Nicaragua shall refrain from
adopting actions that may result in claims against
Standard Fruit arising from the Situation that has
prevailed in the Nicaragua banana industry since
December 21, 1980.

Basic Operational Aspects of Production:
a) Contractual Obligations:

The Covernment of Nicaragua and Standard
Fruit shall enter a contract (following the of-
ficial resolution without claim or damage of pre-
existing contracts which might be thought to
conflict therewith) for the purchase of all ba-
nanas produced on the acreage presently under

52a

cultivation in the so called “‘Programa Bana-
nero de Occidente’’. Such contract shall be for
a term of five years, shall be entered into with
the competent national entity, which shall in
turn contract with the societies.

b) Prices:

The purchase price agreed by both parties will
be U.S. $4.30 per box F.0.B. Nicaraguan port
of loading for the purchase of first quality fruit,
the price of other quality fruit to be negotiated.
Nicaragua agrees to provide for an offset and
set off against such price of the sum of U.S.
$.50 per box for amortization of loans and pur-
chase of assets and U.S. $.25 per box for tech-
nical services to be provided by Standard Fruit
(as per contract previously negotiated between
the parties).

The corrtract shall contain a provision empow-
ering either party to request renegotiation of
the price to be paid if, at any anniversary date
thereof the aggregate of the prices paid for a
to be specified list of critical materials shall
have increased by more than 10% over that
existing at the date hereof, such base level to
be automatically raised after each reopening.

c) Supervision:

The Government of Nicaragua agrees to provide
for supervision by Standard Fruit of packing
plant practices enunciated by Standard Fruit
and for the carrying out of agricultural prac-
tices recommended by Standard Fruit pursuant
to the technical services agreement referred to
herein.

53a

d) Maintenance of Pre-existing Arrangements:

The integrity of the relationships concerning
the farms, the production societies and the own-
ers and participants thereof is hereby confirmed
by the Government of Nicaragua and the re-
lationships there among will be maintained in
existence as at present with the production so-
cieties ieasing the land, producing bananas and
entering new sale and technical assistance
agreements, all with the result that the decree
of December 21, 1980 shall be officially consid-
ered as having no effect during a period that
shall not exceed five years.

e) Financing: :
The Government of Nicaragua agrees to pro-
vide such advances for improvements, working
capital and capital requirements as are needed
by the production societies for their adequate
operations.

f) Tax Treatment:

The Government of Nicaragua agrees that mat-
ters of tax computation and responsibility shall
be governed by the spirit of the Tax Decree
No. 74 enacted in 1970.

VII. Execution and Delivery:

The parties agree that, in accordance with the
spirit of compatibility and cooperation evidenced
during the negotiations hereinabove memorialized.
the Government of Nicaragua and Standard Fruit
will take all such further actions and execute and
deliver all such applications, decrees, documents
and/or other papers as are necessary to the full
accomplishment of the aims expressed herein.
Thus done and signed, this 11th day of January,
1981.

enemies

54a

Thus done and signed, this 1lth day of January, 1981.

REPUBLIC OF NICARAGUA

by /signature/
A.J. Cruz
Member of Junta de Gobierno

by /signature/ by /signature/ _
Cmdt. J. Wheelock A. Martinez
Minister of Agricultural Minister of Foreign
Development Trade

CASTLE & COOKE, INC.

by /signature/
L. Marks Jr.
Executive Vice President

by /signature/
Robert M. Moore
Vice President and General Counsel

STANDARD FRUIT AND STEAMSHIP
COMPANY

by /signature/
Robert W. Fisher
Executive Vice President

by /signature/

William Swinford
Vice President

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_0050%3A1. Public record. Not legal advice.