Aventis Environmental Science Usa Lp v. Scotts Co.
| Decision Date | 13 January 2005 |
| Docket Number | No. 99 Civ. 4015(LAP)(THK).,99 Civ. 4015(LAP)(THK). |
| Citation | 383 F.Supp.2d 488 |
| Parties | AVENTIS ENVIRONMENTAL SCIENCE USA LP, f/k/a Agrevo Environmental Health, Inc., Plaintiff, v. SCOTTS COMPANY, Scotts' Miracle-Gro Products, Inc., OMS Investments, Inc., and Monsanto Company Defendants. |
| Court | U.S. District Court — Southern District of New York |
Michael D. Blechman, Michael Braff, Jennifer B. Patterson, Kaye Scholer LLP, New York, NY, for Plaintiff.
David M Morris, Fried, Frank, Harris, Shriver & Jacobson, L.L.P., NYC, NY, Dominic Suprenant, Robert C. Juman, Quinn, Emanuel, Urquhart, Oliver & Hedges, LLP, New York, NY, Gregory P. Joseph, Fried, Frank, Harris et al., Linda R. Blumkin, Fried, Frank, Harris, Shriver & Jacobson, New York, NY, Alan M. Unger, Sidley Austin Brown & Wood LLP, New York, NY, Charles W. Douglas, Pro Hac Vice Lead Attorney, John W. Treece, Pro Hac Vice Lead Attorney, for Defendant.
RoundUp — "No Root No Weed No Problem" — has been the dominate non-selective herbicide for many years. This action questions the manner in which RoundUp has retained that dominance: have the defendants in this case acted to drive competitors from the market while depriving the plaintiff the benefit of its bargain, or have defendants simply made sound business decisions that are neither illegal nor violate the letter or spirit of the contracts at issue? Though there is insufficient evidence to support some of plaintiff's claims, genuine issues of material fact remain for a jury to decide. Accordingly, the parties' motions for summary judgment are denied in part and granted in part, and the case shall proceed to trial.
Plaintiff Aventis Environmental Science USA LP ("Aventis ES") is a Delaware limited partnership and the alleged successor to the assets and liabilities of the original plaintiff to this action, AgrEvo Environmental Health, Inc. ("AgrEvo EH") and its affiliates. (Defendants' Joint Statement Pursuant to Civil Rule 56.1 of Undisputed Facts Material to Plaintiff's Antitrust Claims ("Def's Antitrust 56.1") ¶ 1; Third Am. Compl. ¶ 3, 8-10.) Aventis ES was acquired by Bayer AG in June 2002 and merged Aventis ES and Aventis ES's parent company, Aventis CropScience SA, into Bayer CropScience.1
Defendants Scotts Company and Scotts' Miracle-Gro Products, Inc. are Ohio corporations with their principal places of business in Marysville, Ohio and Port Washington, New York, respectively. (Def's Antitrust 56.1 ¶¶ 2-3.) Defendant OMS Investments, Inc. is a Delaware corporations (Def's Antitrust 56.1 ¶ 4.) Scotts Company, Scotts' Miracle-Gro Products, Inc. and OMS Investments, Inc. are herein collectively referred to as "Scotts". Defendant Monsanto Company ("Monsanto") is a Delaware corporation with its principal place of business in St. Louis, Missouri.
In 1994, AgrEvo EH developed a non-selective herbicide ("NSH"), glufosinate ammonium ("GA"), which it marketed and sold to consumers under the trade name "Finale." (Def's Antitrust 56.1 ¶ 4; Plaintiff's Amended Counter Statement of Disputed Material Facts in Opposition to Defendants' Motions for Summary Judgment ("Pl's Antitrust Opp. 56.1") ¶ 10.) On May 15, 1998, AgrEvo EH, entered into an Asset Sales Agreement (the "ASA") with Scotts' Miracle-Gro Inc. and OMS Investments, Inc. that sold to Scotts "certain rights, title and interest" in AgrEvo EH products, including Finale, which were part of AgrEvo EH's Home and Garden Consumer Products Business.2 (ASA p. 1-2.) Enumerated product registrations, title to trademark registrations and applications, customer lists, and other assets were also sold. (ASA p. 1-2.)
In conjunction with the ASA, AgrEvo EH and Scotts entered into an Exclusive GA Supply Agreement (the "GA Supply Agreement" or "GASA") whereby AgrEvo EH would manufacture and supply Scotts' requirements of GA, the active ingredient in Finale. (GASA p. 1.) The GA Supply Agreement contained a "Take or Pay Obligation" that required Scotts either to purchase $12.6 million of GA during the first three years of the GA Supply Agreement or to pay 50% of the difference between the $12.6 minimum purchase commitment and the amount of actual GA purchased. (GASA § 2.3.) Scotts' maximum obligation to AgrEvo EH pursuant to the this provision (the "take-or-pay provision"), the amount Scotts would owe if Scotts purchased no GA from AgrEvo EH, was thus $6.3 million. (Def's Antitrust 56.1 ¶¶ 41-42.)
In conjunction with the ASA, Scotts and AgrEvo EH also entered into a Non-Exclusive Insecticide Supply Agreement (the "Insecticide Supply Agreement" or "ISA"). The Insecticide Supply Agreement set forth the terms by which Scotts would become the non-exclusive distributor of AgrEvo EH's insecticide products and AgrEvo EH would supply all of Scotts' requirements for the various insecticides.
Monsanto developed a proprietary NSH, glyphosate, in 1984, and Monsanto began manufacturing and marketing glyphosate to consumers under the name RoundUp. (Def's Antitrust 56.1 ¶ 9; Pl's Antitrust Opp. 56.1 ¶ 9.) Since Monsanto's introduction of the product, RoundUp has been very successful, indeed the best-selling residential NSH in the United States. Though much of this case depends on the characterization of Monsanto's actions and motivations in deciding to sell some or all of its interest in RoundUp, Monsanto contends that in late 1997 it decided to concentrate on the "life sciences" business and began looking to sell its consumer lawn and garden division, called Solaris, which included RoundUp. (Def's Antitrust 56.1 ¶ 12.) Scotts initially indicated to Monsanto that it was interested in the RoundUp business, but in early 1998 Monsanto entered into exclusive negotiations with another company for the sale of Solaris. (Def's Antitrust 56.1 ¶ 19.)
Monsanto's exclusive negotiations, however, collapsed, and in April 1998, potential purchasers of the Solaris division, including Scotts, were again contacted. (Def's Antitrust 56.1 ¶¶ 30-34.) On June 15, 1998, Scotts submitted a bid to purchase the non-RoundUp assets of the Solaris division and to become Monsanto's exclusive agent and marketer of RoundUp in the United States. (Def's Antitrust 56.1 ¶ 52.) Monsanto evaluated the bids it had received, and on June 24, 1998, Monsanto and Scotts signed a letter of intent to enter into an exclusive agency and marketing agreement for the sale of consumer RoundUp, which was then executed on September 30, 1998 (the "RoundUp Agreement"). (Def's Antitrust 56.1 ¶¶ 61-62.)
In 1993, Monsanto had entered into a consent decree with the Federal Trade Commission (the "FTC") upon acquiring the Ortho product line from the Chevron Corporation. Under the terms of the consent decree Monsanto agreed not to acquire any direct or indirect interest in any competing NSH until 2003. (Def's Antitrust 56.1 ¶¶ 44-46.) Monsanto asserts that it informed Scotts that under the terms of the consent decree with the FTC, Monsanto believed that it would not be able to enter into the RoundUp Agreement with Scotts until Scotts divested its interest in the Finale assets recently acquired from AgrEvo EH. (Def's Antitrust 56.1 ¶ 47.) Scotts asserts that based on what it was told about the consent decree by Monsanto, Scotts began looking to divest the Finale assets. (Def's Antitrust 56.1 ¶ 47.)
Regardless of Scotts' stated reasons for divesting the Finale assets, which AgrEvo EH contends do not reflect Scotts' true motivations (Pl's Antitrust Opp. 56.1 ¶¶ 44-51), Scotts did in fact divest some of its interest in Finale.3 The parties dispute Scotts' characterization of its offer of the Finale business back to AgrEvo EH and Scotts' efforts to try to find prospective buyers for the Finale assets, but the parties do agree that Scotts did eventually divest at least some of the Finale assets to Farnam Companies, Inc. ("Farnam") on February 15, 1999. (Def's Antitrust 56.1 ¶¶ 66-79; Pl's Antitrust Opp. 56.1 ¶¶ 66-79.) As a result of this divestiture, Farnam became the seller and marketer of Finale (Def's Antitrust 56.1 ¶¶ 83-86), though Scotts retained the take-or-pay obligation and paid almost $6 million in May 2002 pursuant to that provision of the GA Supply Agreement (Def's Antitrust 56.1 ¶¶ 99-102).
AgrEvo EH filed the original complaint in this action on June 3, 1999, which was then amended on August 16, 1999. A second amended complaint was filed by AgrEvo EH on May 17, 2000. Following oral argument, on June 19, 2000, I denied Scotts' and Monsanto's motions to dismiss the second amended complaint, with the exception of my dismissal of AgrEvo EH's claim for tortious interference with contract, which I held did not sufficiently plead an intentional procurement of breach. AgrEvo EH was granted permission by the Honorable Theodore Katz, United States Magistrate Judge, to file the Third Amended Complaint, which was filed on September 7, 2001. On March 31, 2003, I upheld Judge Katz's decision to permit the filing of the Third Amended Complaint. On October 26, 2001, Monsanto filed a motion to dismiss the claims of AgrEvo EH's affiliates for lack of standing, which is converted into a motion for summary judgment and addressed herein.
On May 3, 2004, Scotts and Monsanto filed various motions for summary judgment to dismiss AgrEvo EH's claims in the Third Amended Complaint. Scotts and Monsanto filed joint motions for summary judgment to dismiss AgrEvo EH's antitrust claims for lack of standing and antitrust claims on the merits. Scotts filed a motion for summary judgment to dismiss AgrEvo EH's contract claims, and Monsanto filed a motion for summary judgment to dismiss AgrEvo EH's claim for tortious interference with business relations. Also on May 3, 2004, Monsanto and Scotts filed a joint motion...
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