Alberta Gas Chemicals, Ltd. v. Celanese Corp.

• Decision Date: 07 October 1980
• Docket Number: No. 80 Civ. 1855.,80 Civ. 1855.
• Citation: 497 F. Supp. 637
• Parties: ALBERTA GAS CHEMICALS, LTD., Plaintiff, v. CELANESE CORPORATION and Celanese Chemical Company, Inc., Defendant.
• Court: U.S. District Court — Southern District of New York

497 F. Supp. 637

ALBERTA GAS CHEMICALS, LTD., Plaintiff, v. CELANESE CORPORATION and Celanese Chemical Company, Inc., Defendant.

No. 80 Civ. 1855.

United States District Court, S. D. New York.

October 7, 1980.

Freeman, Meade, Wasserman & Schneider, New York City, for plaintiff; Melvyn Freeman, Jack Gumpert Wasserman, Lawrence S. Fogelson, New York City, of counsel.

Debevoise, Plimpton, Lyons & Gates, New York City, for defendants; Asa Rountree, Steven Klugman, New York City, of counsel.

MEMORANDUM OPINION AND ORDER

SOFAER, District Judge:

In this diversity action, Alberta Gas Chemicals, Ltd. ("Alberta Gas") sues for alleged fraud and unfair competition by Celanese Chemical Co., Inc. ("Celanese"), a wholly owned subsidiary of Celanese Corp. Alberta Gas is Canada's largest producer of methanol; Celanese is the largest producer of methanol in the United States. Alberta Gas claims that Celanese engaged in "an unlawful scheme and plan designed, among other things, to delay or prevent Alberta Gas from constructing additional facilities to produce methanol" in Canada and to reduce plaintiff's capacity to compete with Celanese. (Complaint ¶ 8.) The alleged scheme consists entirely of Celanese's conduct at a hearing before the United States International Trade Commission ("Commission"), held to determine whether imports of methanol from Canada were injuring, or were likely to injure, the domestic methanol-producing industry.

Specifically, Celanese is alleged to have "intentionally presented materially false and misleading testimony to the Commission relating to the principal issues before the Commission, including (i) the failure to disclose Celanese's plans for the substantial expansion of its ... methanol producing facilities in Alberta and the United States, and (ii) the projected demand for methanol." (Complaint ¶ 8.) Celanese allegedly failed to tell the Commission that it was planning to construct extensive new facilities to produce methanol. (Complaint ¶ 9.) Moreover, Celanese testified that demand for methanol would increase in the United States during the 1980's at a rate no greater than 6% to 7%, whereas it allegedly "believed at the time ... that the demand for methanol in the United States during that period would increase at a rate of at least 10% per annum." (Complaint ¶ 10.)

The Commission concluded unanimously that imports of methanol from Canada were not currently injuring the domestic methanol-producing industry, but determined by a vote of three to two that Canadian imports were likely to injure the industry in the future. Once the Commission made its finding of possible future harm, the Treasury Department was required to issue a so-called Finding of Dumping under the Anti-Dumping Act of 1921, 19 U.S.C. §§ 160-171. The effect of this finding was to subject future imports of Canadian methanol to a special dumping duty.

Plaintiff's claim of injury and prayer for relief rest ultimately on its allegation that "upon information and belief, had Celanese Chemical stated the truth as it was known to it with respect to its expansion plans and the demand for methanol in the United States, the Commission would not have found that there was a likelihood of future injury to the United States methanol industry by reason of the sale of methanol to the United States by Alberta Gas." (Complaint ¶ 11.) Alberta's alleged injuries have resulted solely from the Commission's determination, so for plaintiff to succeed that determination must be shown to have been caused by Celanese's alleged misrepresentations.

Defendant Celanese moves to dismiss the complaint on three grounds: (1) lack of jurisdiction; (2) failure to exhaust administrative remedies; and (3) failure to state a cause of action. All three contentions seem meritorious, but dismissal is now granted for plaintiff's failure to state a cause of action.

Under New York law, "a plaintiff who has lost his case because of perjured testimony cannot sue the perjurer for damages." Anchor Wire Corp. v. Borst, 277 App.Div. 728, 729, 102 N.Y.S.2d 871, 872 (1st Dep't 1951). Indeed, the rule is universally recognized as necessary to prevent matters from being endlessly relitigated. "Thus, the losing party's remedy is limited to a direct appeal in the case where the alleged perjury occurs." Newin Corp. v. Hartford Accident & Indemnity Co., 37 N.Y.2d 211, 217, 371 N.Y.S.2d 884, 889-90, 333 N.E.2d 163, 166 (1975). See generally 70 C.J.S. Perjury § 92 (1951 & Supp. 1979); Annot., 54 A.L.R.2d 1298 (1957 & Supp. 1978).

Plaintiff correctly asserts an exception to this rule "where the perjury is merely a means to the accomplishment of a larger fraudulent scheme." Newin Corp. v. Hartford Accident & Indemnity Co., supra, 37 N.Y.2d at 217, 371 N.Y.S.2d at 890, 333 N.E.2d at 166. The "`compelling policy that fraud be frustrated requires ... that one who defrauds not gain sanctuary merely because a narrow issue, by very reason of his fraud, has been determined in his favor. If the total objective of the scheme was the determined issue, then there is a bar; but if the total objective was greater than the determined issue, and the determined issue was but a step or a part of the total objective, then there is no bar.'" 37 N.Y.2d at 218, 371 N.Y.S.2d at 890, 333 N.E.2d at 167 (quoting Burbrooke Manufacturing Co. v. St. George Textile Corp., 283 App.Div. 640, 643-44, 129 N.Y.S.2d 588, 592 (1st Dep't 1954) (Breitel, J.)).

Plaintiff fails to come within this exception. It alleges that defendant's conduct at the Commission also was intended "to delay or prevent Alberta Gas from constructing additional facilities to produce methanol in Alberta ...." (Complaint ¶ 8.) But this allegation is insufficient to create a larger scheme of which the perjury was merely a part. The larger scheme must entail some conduct on the tortfeasor's part other than simply the perjury itself. Even if Celanese offered perjured testimony to injure Alberta Gas, it did nothing else; and all the consequences of what it did resulted from its conduct before the Commission and from the Commission's finding. As in Levy v. Hayward, 248 F.2d 152, 153 (D.C.Cir.1957) (per curiam), cert. denied, 356 U.S. 941, 78 S.Ct. 783, 2 L.Ed.2d 815 (1958), defendant's alleged fraud involved no "fraudulent conduct beyond the giving of false testimony." Cf. Woods Exploration & Producing Co. v. Aluminum Co. of America, 438 F.2d 1286 (5th Cir. 1971), cert. denied, 404 U.S. 1047, 92 S.Ct. 701, 30 L.Ed.2d 736 (1972) (perjury part of broader antitrust conspiracy). In fact, plaintiff was offered the opportunity at oral argument to amend the complaint so as to allege fraudulent conduct other than the perjury, but declined to do so.

Perhaps recognizing that it fails to allege additional fraudulent conduct, plaintiff interprets New York law to permit a suit if the injured party had no effective remedy at the earlier proceeding, because the new claim is broader than or different from the claim in the prior proceeding. But Newin stands for no such broad proposition. Newin was a fraud action in which plaintiffs were beneficiaries of an excess liability insurance policy and claimed that, by procuring perjured testimony, the primary insurer effectuated a settlement for an amount less than the primary coverage. Apparently, no fraudulent conduct was alleged in addition to the conduct that had occurred at the earlier action.¹ But the plaintiffs in the succeeding action-unlike the plaintiff here-were not parties to the original action in which the perjury took place and therefore "had no effective remedy in the prior action." 37 N.Y.2d at 218, 371 N.Y.S.2d at 891, 333 N.E.2d at 167. Plaintiffs in Newin had in fact objected at the earlier proceeding to the bankruptcy referee's approval of the settlement allegedly procured by fraud, but the referee "refused to make any finding on the validity of the plaintiffs' fraud charges." 37 N.Y.2d at 215, 371 N.Y.S.2d at 887, 333 N.E.2d at 165. Newin would therefore appear to preclude a collateral attack on the bankruptcy referee's findings by any party who had the opportunity to claim fraud at those proceedings and did not do so, or in cases in which the issue of fraud was resolved as a result of a party's claim.

If Newin could be read as expansively as plaint...