Perenco Nigeria Ltd. v. Ashland Inc.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

__________________________

No. 00-20209
__________________________

PERENCO NIGERIA LIMITED, a Bahamas Corporation,

Plaintiff-Counter-Defendant-Appellant,

versus

ASHLAND INC.; a Kentucky Corporation,
BLAZER ENERGY CORP.; a Delaware Corporation,
ASHLAND EXPLORATION HOLDINGS, INC.; a Delaware Corporation,
ASHLAND CRUDE MARKETING, INC., a Delaware Corporation,

Defendants-Appellees,

and

ASHLAND EXPLORATION NIGERIA, INC.; a Delaware Corporation,
ASHLAND NIGERIA DEVELOPMENT COMPANY;
ASHLAND OF NIGERIA LTD., a Delaware Corporation,

Defendants-Counter-Claimants-Appellees.

___________________________________________________

Appeal from the United States District Court
for the Southern District of Texas
___________________________________________________

February 13, 2001

Before HIGGINBOTHAM, WIENER, and DENNIS, Circuit Judges.

WIENER, Circuit Judge:

In this diversity case arising out of its ill-fated attempt to

obtain oil exploration and production rights in Nigeria, Plaintiff-

Appellant Perenco Nigeria Limited (“Perenco”) appeals the district

court’s grant of summary judgment to Defendants-Appellees and
Defendants-Counter-Claimants-Appellees (collectively, “Ashland”) on

breach of contract and fraud claims. Finding no reversible error,

we affirm.

I.

FACTS AND PROCEEDINGS

Perenco is the wholly owned subsidiary of a French energy

company (Perenco S.A.) which conducts oil exploration and

production operations in West Africa. In 1997, Perenco sought to

extend its presence to Nigeria and consequently entered into

negotiations with Ashland to purchase its Nigerian oil interests.

The subject of the negotiations was the stock of two Ashland

subsidiaries, Ashland Oil (Nigeria) Company, Ltd. (“AONC”) and

Ashland Nigeria Exploration Unlimited (“ANEU”), which were

signatories to Production Sharing Contracts (“PSCs”) granted by the

Nigerian National Petroleum Corporation (“NNPC”). The PSCs gave

AONC and ANEU the right to produce oil in Nigeria as “contractors”

for the NNPC in return for a share of the profits. The transaction

between Ashland and Perenco was structured as a sale of stock in

AONC and ANEU rather than as a sale or assignment of the PSCs

themselves to avoid the requirement under the PSCs that formal

consent to any sale or assignment of the PSCs be obtained from the

NNPC prior to the sale.

During negotiations of the Stock Purchase Agreement (“SPA”)

between Perenco and Ashland, Perenco suggested including a

2
provision that would condition the closing on the “relevant”

Nigerian authorities making no objection to the stock sale.

Ashland’s representatives objected to this provision, however,

expressing three grounds: (1) the transaction, as a sale of stock

rather than the underlying assets, did not require the approval of

the Nigerian authorities (other than the pro forma approval of the

Nigerian Securities and Exchange Commission), (2) it would be

unwise to include language in the SPA that implied that the

Nigerian Minister of Petroleum, Chief Etete (“the Minister”), had

approval power with which he was not legally vested, and (3) the

Minister in fact had no objection to the sale.1 In reliance on

these representations, Perenco contends, it withdrew its request to

include the proposed condition in the SPA.

Unbeknownst to Perenco, however, Roger Benedict, the Managing

Director of Ashland’s operations in Nigeria, had already informed

his superiors that he was “very concerned that if the [stock] sale

goes through, [the Minister] will attempt to stop it. He likely

has heard that we’re for sale from various sources and the message

he was sending me yesterday was clear: ‘We’re going to need the

Government’s approval.’ He may be wrong from a legal standpoint

but from a practical standpoint he’s correct.” Furthermore, after

reporting that the Minister had threatened to revoke Ashland’s

1
Ashland denies that its representatives orally informed
Perenco that the Minister had “no problem” with the sale, but for
summary judgment purposes we will assume that the statement was
made.

3
PSCs, Benedict advised his superiors that “the best approach is to

avoid giving [the Minister] any indication of our position and what

the outcome will be, and the next time I see him it is very likely

he will be given a ‘fait accompli.’” None of this information was

shared with Perenco.

Even though the SPA does not include Perenco’s suggested

condition, it does contain a clause providing for termination of

the agreement, inter alia, “at any time by the mutual written

agreement of Buyer and Sellers.”2 The SPA also provides that if

the agreement were terminated

by Sellers for any reason except pursuant to an express
right to do so set forth herein, Buyer shall be entitled
to exercise all rights and remedies available at law or
in equity as a result of such wrongful termination;
provided in no event shall Buyer ever be entitled to any
consequential or speculative damages including, without
limitation, lost profits.3

Furthermore, the SPA states that each party to the agreement will

pay “all legal and other costs and expenses incurred by such party

or any of its affiliates in connection with this Agreement[.]”4

Finally, the SPA contains a standard merger clause whereby Ashland

expressly disclaims “all liability or responsibility for any other

2
Article 10.01(d). That article also provides that the
agreement “may be terminated . . . (a) by Sellers, if through no
fault of Sellers, the Closing does not occur on or before July 31,
1997; [or] (b) by Buyer, if through no fault of Buyer, the Closing
does not occur on or before July 31, 1997.”
3
Article 10.02(a) (emphasis added). The SPA specified that
this provision survives termination of the agreement.
4
Article 12.03.

4
representation, warranty, statement or information made or

communicated (orally or in writing) to Buyer” except of course “to

the extent expressly set forth” in the SPA.5

The SPA was executed by the parties in Houston on June 6,

1997. In it, Perenco contracted to purchase the stock of AONC and

ANEU for $60 million (subject to adjustments). Pursuant to the

SPA, Perenco tendered a deposit of $1 million. Perenco now asserts

that, among the representations and warranties made by Ashland in

the SPA, the following were known by Ashland to be false when it

executed the SPA, in light of Ashland’s knowledge of the Minister’s

position on any such sale:

• “The Shares are . . . free and clear of all . . .
encumbrances of any kind and are not subject to any
agreements or understandings . . . with respect to
the voting or transfer thereof.”6

• “Neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated herein will . . . conflict with or
result in a breach, default or violation of, any
material agreement, document, instrument, judgment,
decree, order, governmental permit, certificate or
license to which Sellers or any International
Company is a party or is a subject which would have
a Material Adverse Effect[.]”7

• “To the knowledge of the Sellers . . . no consents
are required to be obtained by Sellers or any
International Company for the transfer of the

5
Article 11.05.
6
Article 4.03.
7
Article 4.04.

5
 Shares to Buyer.”8

The SPA specified a closing date of July 1, 1997.

Soon after the execution of the SPA, two Perenco

representatives, P.C. Spink and Denis Bizeau, traveled to Nigeria

to inspect the Ashland properties. Article 9.08 of the SPA

provides that

[a]s soon as practical following the execution of this
Agreement, Sellers and Buyer will advise the appropriate
Governmental Authorities in Nigeria of the change in
control of AONC and ANEU. Sellers, at Buyer’s request,
will arrange meetings with the Nigerian Authorities and
will accompany and introduce Buyer.

Accordingly, Roger Benedict set up a meeting with the Minister that

was to take place on June 11, 1997. When Benedict and the Perenco

representatives arrived, however, the Minister did not meet with

them, and the meeting was rescheduled for the next day.

Around 10:30 p.m. that evening, though, at the urging of their

Nigerian “consultant,” Major General Bajowa, the Perenco

representatives (without Benedict’s knowledge) met with the

Minister at his home. At that meeting, when the Perenco

representatives announced that they had “bought Ashland’s crude

reserves,” the Minister announced that Ashland was doing “what I

have told them not to do” and threatened to detain Benedict. On

June 13, 1997, the Minister issued a statement that purported to

terminate Ashland’s PSCs.

According to Perenco, it did not become aware of the problems

8
Article 4.19.

6
that Ashland was having with the Minister until June 12, 1997, when

“Perenco for the first time came to understand that the Minister

had told Ashland that his consent was necessary.” Perenco also

received a copy of a letter to Ashland from the Office of the

Minister on or about July 10, 1997, detailing matters that Perenco

now characterizes as fraud, such as statements that the Minister

had twice invited Ashland to his office, and twice Ashland had

undertaken some action that the Minister characterized as

dishonest. Likewise, Roland Fox, the President of Perenco,

testified in his deposition that Perenco had knowledge of Ashland’s

alleged deception of the Minister during the month-long period that

followed, during which unsuccessful efforts were made by Perenco,

Ashland, the United States Department of State, the White House,

and members of the United States Congress to reverse the Minister’s

position on Ashland’s PSCs.9

In light of these events, on July 11, 1997, representatives of

Ashland and Perenco discussed the SPA and agreed that it should be

terminated. On July 16, 1997, Ashland wrote a letter to Roland Fox

stating that

the Minister of Petroleum has informed Ashland that the
termination of the [PSCs], which constitute owned assets
of the international companies is final and irrevocable.
As a result, Ashland will be unable to complete the
transaction contemplated in the [SPA] . . . and the
Principals have agreed on the terms and conditions of

9
Ultimately, Ashland was permitted to sell its rights (at a
considerable loss) to a company of the Minister’s choosing for
compensation in an amount determined by that company and the NNPC.

7
 such termination.

Within three (3) business days after receipt of an
executed copy of this Letter of Termination, Ashland will
refund the Deposit in immediately available funds. This
termination is without prejudice to any rights or
remedies that may otherwise be available to the
parties.10

Fox immediately wrote back, suggesting revisions to the letter, and

a revised draft, which included Fox’s suggested changes, was sent

back to him.11 Fox then signed and returned that letter to Ashland

on July 22, 1997, and shortly thereafter Ashland returned Perenco’s

$1 million deposit. Accordingly, the SPA was terminated pursuant

to an express right to do so —— by the mutual agreement of the

parties —— as provided by Article 10.01(d).

Perenco filed this suit in 1998, alleging four causes of

action: breach of contract, statutory fraud, common-law fraud, and

negligent misrepresentation. With respect to each cause of action,

Perenco claims $300 million in damages for loss of the benefit of

its bargain and $100 million for loss of reputation.12 In 1999, the

10
Emphasis added.
11
Fox suggested that the phrase “the Principals have agreed on
the terms and conditions of such termination” be changed to read
“the agreement is therefore terminated.”
12
Ashland’s counterclaims against Perenco for breach of
contract and negligent misrepresentation were dismissed without
prejudice by the district court when it rendered final judgment.
Ashland alleged that Perenco (1) breached the SPA by contacting the
Minister directly and “conducting [itself] in an undiplomatic and
discourteous manner,” and (2) negligently misrepresented the nature
of the transaction to the Minister causing the loss of Ashland’s
PSCs.

8
district court granted summary judgment to Ashland, reasoning that

Perenco had elected the remedy of rescission by entering into the

termination agreement with Ashland and accordingly was precluded

from seeking the remedy of damages. The district court also ruled

that the alleged misrepresentations were not false, that they were

not representations of fact, and that in any case Perenco had not

relied on the representations to its detriment. The district court

entered final judgment, after which Perenco timely filed a notice

of appeal.

II.

ANALYSIS

A. Standard of Review

We review a grant of summary judgment de novo, applying the

same standard as the district court.13 A motion for summary

judgment is properly granted only if there is no genuine issue as

to any material fact.14 An issue is material if its resolution

could affect the outcome of the action.15 In deciding whether a

fact issue has been created, we must view the facts and the

inferences to be drawn therefrom in the light most favorable to the

13
Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380
(5th Cir. 1998).
14
Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317,
322 (1986).
15
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

9
nonmoving party.16

The standard for summary judgment mirrors that for judgment as

a matter of law.17 Thus, the court must review all of the evidence

in the record, but make no credibility determinations or weigh any

evidence.18 In reviewing all the evidence, the court must disregard

all evidence favorable to the moving party that the jury is not

required to believe, and should give credence to the evidence

favoring the nonmoving party as well as that evidence supporting

the moving party that is uncontradicted and unimpeached.19

B. Breach of Contract

As an initial matter, we note that both parties to this

complex, arms-length transaction are sophisticated, well-

represented corporations which had had extensive prior experience

with the vagaries of oil exploration and production in Africa.20

Although both parties agree that Ashland was not legally required

under either Nigerian law or the terms of the PSCs to obtain the

16
See Olabisiomotosho v. City of Houston, 185 F.3d 521, 525
(5th Cir. 1999).
17
Celotex Corp., 477 U.S. at 323.
18
Reeves v. Sanderson Plumbing Products, Inc., 533 U.S.---, 120
S.Ct. 2097, 2102 (2000).
19
Id. at 2110.
20
In fact, Denis Bizeau, one of the Perenco representatives who
traveled to Nigeria after the SPA was executed, stated in his
deposition testimony that “[o]ne of the reasons [for the trip to
Nigeria] was . . . to visit with the Minister, say hello, and
introduce Perenco, reintroduce Perenco to him, because he knew us
already. And his team knew us even much better.”

10
Minister’s consent to the stock transaction contemplated in the

SPA, the record evidence fully supports the view that both parties

well understood that, as a practical matter, the transaction needed

the blessing of the Nigerian government to be successful. Even

Perenco admits that Ashland’s alleged misrepresentation that the

Minister “had no problem” with the sale indicated only that the

Minister had no objection “in principle” to the sale and was not

misleading with respect to any objections that the Minister might

have had to Perenco itself as the buyer. In short, sophisticated

and experienced parties, supported by platoons of lawyers,

consultants, and advisers, cannot simply shut their eyes when

entering into a complex, multi-million-dollar transaction in a

volatile venue, then claim to have been deceived or misled when the

deal later heads south.

Admire as we might Perenco’s creativity in devising its

breach-of-contract theory of liability, it is nevertheless apparent

to us that Perenco’s so-called “breach of contract” claims are

essentially fraud claims in a different guise. The core

allegations that Perenco relies on as the basis of its

breach-of-contract claims are precisely the same as those that

comprise the basis of its fraud claims, i.e., that Ashland falsely

represented to Perenco that the Minister had “no problem” with the

transaction. But alleged misrepresentations that pre-date the very

existence of a contract cannot constitute a breach of that

contract.

11
 Neither can Perenco can show any damages recoverable on a

breach-of-contract theory of liability. Perenco is entitled only

to such damages as would place it in the position that it would

have occupied had Ashland not breached the contract;21 however,

under Texas law, Perenco cannot recover damages for loss of

business reputation in a breach-of-contract action.22 Accordingly,

had Ashland disclosed the relevant information, Perenco could

either have refused to contract or reserved the right to terminate

in the event of interference by the Minister. Under either

hypothetical alternative, Perenco would be in exactly the same

position in which it now finds itself.23 It follows then that, as

Perenco cannot show that Ashland’s alleged misrepresentation

deprived Perenco of any benefit of its bargain, its breach-of-

contract claim must fail.

C. Tort

Perenco also asserts tort claims of common-law fraud,

statutory fraud in the sale of stock, and negligent

21
See Stewart v. Basey, 245 S.W.2d 484, 486 (1952).
22
See Hollywood Fantasy Corp. v. Gabor, 151 F.3d 203, 214 (5th
Cir. 1998).
23
Perenco’s unsupported belief that it somehow could have
secured the benefit of its bargain had it only known of the
Minister’s intentions is too speculative to support an award of
damages. Cf. Richter, S.A. v. Bank of America Nat. Trust and Sav.
Ass’n, 939 F.2d 1176, 1188 (5th Cir. 1991) (concluding that
plaintiff’s belief that he could have sold his interest in a winery
for $1.6 million was insufficient evidence of damages because there
was no proof of an offer to purchase).

12
misrepresentation. Although we agree with the district court that

Perenco’s fraud claims cannot survive Ashland’s motion for summary

judgment, we reach that conclusion via a somewhat different route.

Under Texas law, a plaintiff alleging fraud must establish (1)

a material misrepresentation, (2) which was false, and (3) which

was either known to be false when made or was asserted without

knowledge of its truth, (4) which was intended to be acted upon,

(5) which was relied upon, and (6) which caused injury.24 The

absence of proof of any element, of course, will prevent recovery.25

The elements of statutory fraud in the sale of stock are

substantially the same, except that to recover actual damages, a

plaintiff does not have to prove that the defendant knew a

statement was false.26 Similarly, the primary difference between

a cause of action for negligent misrepresentation and one for fraud

is that a negligent misrepresentation claim does not require an

actual intent to defraud, only that in doing so the party making

the false statement acted negligently in doing so.27 All three tort

causes of action asserted by Perenco —— common-law fraud, statutory

24
See Formosa Plastics Corp. USA v. Presidio Engineers and
Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998).
25
Custom Leasing, Inc. v. Texas Bank & Trust Co. of Dallas, 516
S.W.2d 138, 143 (Tex. 1974).
26
Swanson v. Schlumberger Technology Corp.,895 S.W.2d 719, 732
(Tex. App. —— Texarkana 1995), rev’d on other grounds, 949 S.W.2d
171 (Tex. 1997).
27
Federal Land Bank Ass’n of Tyler v. Sloane, 825 S.W.2d 439,
442 (Tex. 1991).

13
fraud in the sale of stock, and negligent misrepresentation ——

require a showing of both reliance and damages.

The district court found that no misrepresentation had been

made by Ashland, which had only expressed “its legal opinion that

the Minister’s approval was not required.” That conclusion by the

court, however, reflects a misconception of the nature of Perenco’s

claims. The misrepresentation of which Perenco complains is not

that the Minister’s approval was legally required, but rather that

the Minister, in fact, had “no problems with” this particular stock

sale and would not interfere.28 The summary judgment record

contains ample evidence to support Perenco’s contention that, at

the time Ashland allegedly represented that the Minister “had no

problems with” the sale, Ashland knew to the contrary that the

Minister was threatening to block any sale of Ashland stock.

But the summary judgment record also contains ample evidence

supporting the district court’s conclusion that when Perenco agreed

to terminate the SPA, despite its knowledge at that time of

Ashland’s alleged mendacity, Perenco nevertheless knowingly elected

the remedy of rescission and thereby waived its right to bring

28
For this reason, we reject Ashland’s invitation to apply the
Act of State doctrine, whereby United States courts will not pass
judgment on the validity of the public acts of foreign sovereigns
within their own territory. See Callejo v. Bancomer, S.A., 764
F.2d 1101 (5th Cir. 1985). Ashland’s alleged misrepresentation
turns on its own knowledge of the Minister’s position on the sale
prior to the signing of the SPA, and not on the legality or
“validity” of the Minister’s subsequent actions with respect to
blocking the sale, much less the legal technicality of his
authority to approve or disapprove of the transaction.

14
these claims for damages. Under well-established principles of

Texas law, when a party discovers fraudulent inducement in the

making of a contract, that party must choose within a reasonable

time either to (1) stand to the bargain and seek damages for fraud,

or (2) rescind the contract.29 Perenco’s claim that it only

discovered the full extent of Ashland’s duplicity after signing the

termination agreement is flatly contradicted by its own admission

that on June 12, 1997 (twenty days before the signing of the

termination agreement) “Perenco for the first time came to

understand that the Minister had told Ashland that his consent was

necessary.”30 Likewise, Perenco received a copy of a letter from

the Office of the Minister on or about July 10, 1997, detailing the

same matters that Perenco now characterizes as fraud, such as

statements by the Minister that he had twice invited Ashland to his

office, and twice Ashland had undertaken some action that the

Minister characterized as dishonest. Even Perenco’s president

testified in his deposition that Perenco acquired knowledge of

Ashland’s alleged deception of the Minister over the course of the

month-long period that unsuccessful efforts were made to reverse

the Minister’s position on Ashland’s PSCs. In light of this

uncontroverted evidence, we cannot but conclude that Perenco waived

its right to bring a claim for damages when it knowingly and

29
L&B Oil Co., Inc. v. Arnold, 620 S.W.2d 191, 193 (Tex. App.
—— Waco 1981, writ dismissed).
30
Emphasis added.

15
willingly rescinded its agreement with Ashland.

Perenco nevertheless seeks to avoid this result by claiming

that the “without prejudice” clause of the termination agreement

permits Perenco to terminate the contract and sue for damages.

This contention is meritless: Perenco’s reading of the “without

prejudice” clause completely disregards the termination agreement’s

express reservation of only those “rights and remedies that may

otherwise be available to the parties.”31 Because, as Perenco quite

correctly maintains, we must give effect to all the provisions of

the termination agreement,32 then we must also reject Perenco’s

attempt to read “otherwise available” out of the termination

agreement.33 Furthermore, as a contract must be interpreted to

validate the intent of the parties,34 Perenco’s expansive reading

of the “without prejudice” clause flies in the face of the SPA’s

termination provisions which specifically prohibit suits for lost

31
Emphasis added.
32
See R&P Enterprises v. LaGuarta, Gaveral & Kirk, Inc., 596
S.W.2d 517, 519 (Tex. 1980).
33
Accordingly, as we do not find the language of the
termination clause ambiguous, we need not reach Perenco’s claim
that the district court abused its discretion in denying Perenco’s
motion to supplement the record with parole evidence consisting of
the deposition testimony of the clause’s drafter, which testimony
Perenco chose not to tender in response to Ashland’s summary
judgment motion.
34
Harris v. Rowe, 593 S.W.2d 303, 306 (Tex. 1979).

16
profits35 or even out-of-pocket expenses.36 Accordingly, we agree

with the district court that having already made a knowing election

to rescind the contract and restore the status quo ante (including

Perenco’s recovery of its $1 million deposit), Perenco cannot now

seek a “double” recovery of damages.

III.

CONCLUSION

For the reasons explained above, the district court’s grant of

summary judgment is

AFFIRMED.

35
Section 10.02.
36
Section 12.03.

17