Ineos Polymers Inc. v. Basf Catalysts

Decision Date13 January 2009
Docket NumberNo. 08-1359.,08-1359.
PartiesINEOS POLYMERS INCORPORATED, Plaintiff-Appellant, v. BASF CATALYSTS and BASF Aktiengesellsch, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

Douglas R. Carlson, Wildman, Harrold, Allen & Dixon, Chicago, IL, Francis H. Morrison, III (argued), Axinn, Veltrop & Harkrider LLP, Hartford, CT, for Plaintiff-Appellant.

John Scholnick, Roger Pascal (argued), Schiff Hardin, LLP, Candice C. Jones, Robert E. Shapiro, Barack, Ferrazzano, Kirschbaum & Nagelberg LLP, Chicago, IL, for Defendants-Appellees.

Before RIPPLE, EVANS and SYKES, Circuit Judges.

RIPPLE, Circuit Judge.

INEOS Polymers Incorporated ("INEOS Polymers") brought this action against BASF Catalysts and BASF Aktiengesellsch ("BASF AG") for breach of contract and tortious interference with contractual rights. The district court dismissed the complaint with prejudice, and INEOS Polymers appealed. For the reasons set forth in this opinion, we now reverse the judgment of the district court and remand for further proceedings.

I BACKGROUND
A. Facts
1. The Supply Agreement

In 1992, Amoco Chemical Company, a subsidiary of Amoco Corporation, outsourced the production of its polypropylene catalyst, known as "CD-Catalyst," to Catalyst Resources, Inc. ("CRI"), a company owned by Phillips Petroleum Company ("Phillips"). The agreement reached between Amoco Chemical and CRI was embodied in a long-term supply agreement ("Supply Agreement"). According to the terms of the Supply Agreement, CRI agreed to build a production facility in Texas, and Amoco Chemical agreed to pay the cost of the facility over the course of a ten-year period through its purchasing commitments.

The detailed Supply Agreement is over one hundred pages long and includes terms for production and pricing, as well as more general contractual terms. The dispute in this case centers on the interpretation of Articles 17 and 19 of the contract. Article 17, entitled "The Right of First Refusal Clause," states in relevant part:

17.A. During the term of this Agreement, neither CRI nor Phillips, which indirectly wholly owns CRI, shall sell, transfer, assign, grant any option with respect to, merge, or otherwise dispose of any of the ownership or control of CRI, or any part of the Plant or of the Plant Site, or allow any of the foregoing to occur, unless: (i) CRI or Phillips has received a bona fide arm's-length offer to transfer the entire ownership or control of CRI, or to transfer the ownership or control of certain assets of CRI, which assets include but are not limited to the entirety of the Plant and the Plant Site, to such party or parties; (ii) CRI or Phillips has determined that it is willing to accept such offer; (iii) CRI or Phillips has notified Amoco, in writing, of the terms and conditions of such offer; (iv) CRI or Phillips has first afforded Amoco the option to buy all of CRI or to buy all of the certain assets of CRI, which assets include but are not limited to the entirety of the Plant and the Plant Site, whichever is applicable, on terms and conditions no less favorable to Amoco than those contained in the offer; and (v) Amoco does not exercise its option to buy all of CRI or to buy all of the certain assets, which assets include but are not limited to the entirety of the Plant and the Plant Site, whichever is applicable, on such terms and conditions within ninety (90) days of receipt of the written notification referred to in (iii) above.

R.50-2, Ex. A at 95-96. Article 17.B. goes on to state that the right of first refusal does not apply to transfers of ownership to any company wholly owned by Phillips. Article 17.C. provides that, in the event that Amoco fails to exercise its option, and CRI completes the transaction, the transferee in those circumstances would continue to be bound by the Supply Agreement, including specifically Article 17.A. See id. at 96-97.

Also at issue is one of the "General Provisions" of Article 19, specifically Article 19.A., concerning "Assignment":

Assignment. Neither party may assign this Agreement, or any part thereof, without the prior written consent of the other, except that Amoco may assign this Agreement in its entirety only without the consent of CRI at any time to an entity owned fifty percent (50%) or more, directly or indirectly, by Amoco Corporation, and CRI may assign this Agreement in its entirety only without the consent of Amoco to any company one hundred percent (100%) owned, directly or indirectly, by Phillips. Any other attempted assignment without the other party's consent shall be void. The terms of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted delegatees and assignees.

Id. at 100.

2. Corporate Changes

Over the years since the Supply Agreement was entered, each party has undergone a number of corporate mergers, restructurings or changes in ownership, which are crucial to understanding the parties' claims in this appeal. The corporate evolution of both parties is set forth below.

In 1995, Amoco Chemical assigned its rights and duties under the Supply Agreement to Amoco Polymers.1 On December 31, 1998, Amoco Corporation, the parent of Amoco Chemical and indirect parent of Amoco Polymers, merged with a subsidiary of The British Petroleum Company p.l.c. ("BP"). The merged entity was renamed BP Amoco Corporation. Subsequent to this merger, Amoco Polymers was renamed BP Amoco Polymers, Inc.2

In 2005, BP announced a corporate reorganization of its petrochemical and refining business. Pursuant to this reorganization, on March 31, 2005, the shares of BP Amoco Polymers were transferred to a newly formed limited liability company, indirectly owned by BP, called O & D USA LLC. On May 24, 2005, O & D USA LLC was renamed Innovene USA LLC, and BP Amoco Polymers was renamed Innovene Polymers, Inc. Later that same year, INEOS U.S. Intermediate Holding Company LLC acquired Innovene LLC, the parent company of both Innovene USA LLC and Innovene Polymers. On May 31, 2006, the entities changed their names to INEOS USA LLC and INEOS Polymers, Inc., respectively.

On the CRI side of the transaction, in 1994, Mallinckrodt purchased CRI, including the plant and CRI's rights and obligations under the Supply Agreement. By letters dated October 13, 1993, and December 17, 1993, Amoco waived its right of first refusal under Article 17 with respect to the purchase of CRI by Mallinckrodt. In 1998, another company, Engelhard purchased CRI's assets from Mallinckrodt; again, Amoco Polymers waived its right of first refusal.3 In 1999, and again in 2005, Engelhard entered into a sale/leaseback transaction first with Chase Equipment Leasing, Inc., and later with Key Corporate Capital, that involved assets subject to Article 17; with respect to both of those transactions, Amoco waived its right of first refusal. See R.50-2, Exs. C & D. In June 2006, BASF AG "announced the completion of an acquisition whereby Engelhard became a wholly owned subsidiary of BASF AG and was subsequently renamed and converted to BASF Catalysts." R.50-2, ¶ 40.4

The corporate evolution of the parties to the Supply Agreement, set forth above, are embodied in the following chart:

NOTE: OPINION CONTAINING TABLE OR OTHER DATA THAT IS NOT VIEWABLE

Appellant's Br. at 12 (footnote omitted).

When INEOS Polymers became aware of the Engelhard-BASF AG transaction, it informed Engelhard and BASF Catalysts that it believed that the change of ownership had triggered Article 17's right of first refusal. BASF Catalysts denied that Article 17 was triggered by the transaction. Subsequently, BASF Catalysts discontinued discussions with INEOS Polymers concerning plant improvements unless INEOS Polymers "abandoned its efforts to exercise the right of first refusal." R.50-2, ¶ 48.

B. District Court Proceedings

INEOS Polymers brought an action in the United States District Court for the Northern District of Illinois against BASF Catalysts and BASF AG alleging breach of contract and tortious interference with contractual rights, respectively. BASF Catalysts and BASF AG moved to dismiss the complaint on various grounds, one of which was that INEOS Polymers was an impermissible assignee of the Supply Agreement and, therefore, could not enforce the rights set forth in that agreement. The district court agreed and dismissed INEOS Polymers' amended complaint on the ground that, as an impermissible assignee, it could not maintain an action to enforce the contract.

INEOS Polymers moved for reconsideration and for leave to file a second amended complaint; the district court granted the motions, but again dismissed the complaint with prejudice on the same ground. The district court summarized its holding accordingly:

In sum, the bottom line remains that INEOS is just not an entity owned 50% or more, directly or indirectly, by Amoco Corporation. And that being so, it is not within the limited universe of permitted assignees that was carefully marked out by the original contracting parties when they put their deal together. Hence the motion to reject INEOS' attempted enforcement of Art. 17.A is well taken. And that calls for dismissal not only of the [second amended complaint] but also of the action itself, for INEOS' successive struggles to escape that result have confirmed that the basic defect on which this Court has elaborated at some length, both in Opinion I and this opinion, is not curable.

R.64 at 8.5

II DISCUSSION

As we have just noted, the sole basis on which the district court granted the defendants' motion to dismiss was that INEOS Polymers could not enforce any rights under the contract. According to the district court, the corporate transactions that transformed BP Amoco Polymers into INEOS Polymers involved an assignment of rights under the Supply Agreement to an entity not "owned fifty percent (50%) or more, directly or...

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