Cedar Petrochemicals, Inc. v. Dongbu Hannong Chemical Co.

Citation: 628 F. App'x 793Docket: Nos. 14-2752-cv (Lead), 14-2890-cv (XAP)

Court: Court of Appeals for the Second Circuit; October 15, 2015; Federal Appellate Court

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Cedar Petrochemicals, Inc. (Cedar) appeals the district court's judgment in favor of Dongbu Han-nong Chemical Co. Ltd. (Dongbu) following a four-day bench trial, as well as the court's denial of Cedar's motion for reconsideration. The case stems from a contract dated May 17, 2005, for the sale of 2,000 metric tons of phenol, delivered F.O.B. Ulsan, Korea. After loading the phenol onto the vessel Green Pioneer and transferring it to Cedar's vessel Bow Flora, the phenol was tested in Rotterdam on July 19, 2005, revealing it to be off-specification. Ertisa, S.A., the ultimate purchaser, subsequently filed a claim.

Initially, Cedar sued in Korean court before bringing the current suit against Dongbu on May 24, 2006, alleging the delivery of non-conforming phenol. Cedar's burden was to prove that the phenol was damaged before transfer to the Bow Flora, relying on a "seeding" theory of injury that suggested imperceptible damage occurred under Dongbu's control. The district court rejected this theory and determined Cedar did not meet its burden of proof regarding breach of contract.

On appeal, Cedar argues that the district court (1) abused its discretion by preventing it from elaborating on the seeding theory in its post-trial memorandum, (2) clearly erred in ruling in favor of Dongbu despite a lack of evidence that the phenol was damaged upon delivery, and (3) abused its discretion in denying the merits of Cedar's reconsideration motion. Conversely, Dongbu cross-appeals, asserting that the district court improperly declined to sanction Cedar for its reconsideration motion. Cedar contends that the court prohibited the seeding theory's explanation, but the court had allowed Cedar to address this in their submissions post-trial. Despite Cedar's expert testimony, the court found insufficient evidence linking the Literature to the seeding theory.

Cedar contends that the district court erred in determining that it did not prove the phenol was already injured upon delivery by Dongbu. The court's findings of fact are upheld unless clearly erroneous. Cedar presents several arguments: (1) a stipulation indicating that phenol discolors gradually, contradicting the court's rapid discoloration finding; (2) scientific literature supporting the seeding theory; (3) evidence that discoloration could not occur rapidly due to contaminants; (4) claims that Cedar's expert did not concede against the seeding theory; (5) supporting testimony on blending; and (6) limitations in the quality-inspection regime affecting data reliability. However, the district court found Cedar's experts lacked credibility and their theory could not explain post-shipment test results, as the test results displayed variability inconsistent with the linear degradation expected under the seeding theory. The court's decision favoring Dongbu, affirming that the phenol was not injured before transport, was well-supported. 

Cedar also appeals the denial of its motion to amend findings and alter the judgment, reviewed for abuse of discretion. The standard for reconsideration is strict, requiring the moving party to identify overlooked controlling decisions or data that could alter the court's conclusions. The district court did not abuse its discretion in denying Cedar's motion, as Cedar attempted to link the scientific literature to its theory only after the court's ruling, failing to present any overlooked information during the trial.

Dongbu argues that the district court incorrectly chose not to impose sanctions on Cedar for its motion for reconsideration. Dongbu claims Cedar's motion relied on expert conclusions from a previously withdrawn report, introduced undisclosed documents, and presented a new 'trend analysis' theory. Sanction decisions are reviewed for abuse of discretion, acknowledging that district courts are better positioned to evaluate the relevant facts. The district court deemed Cedar's motion "borderline frivolous" but opted against sanctions, noting Cedar had not faced prior sanctions or warnings. Dongbu contends Cedar was effectively warned under Federal Rule of Civil Procedure 11, as Cedar had acknowledged this warning but refused to withdraw the motion. However, the trial judge's refusal to sanction Cedar was within discretion due to the absence of previous warnings or sanctions. After reviewing all arguments presented by Cedar and Dongbu, the court found them unmeritorious and affirmed the district court's judgment. The ruling was delivered by Judge Katherine B. Forrest from the Southern District of New York.