INTERN. RAW MATERIALS v. Stauffer Chemical Co.

• Decision Date: 13 June 1991
• Docket Number: Civ. A. No. 87-7541.
• Parties: INTERNATIONAL RAW MATERIALS, INC. v. STAUFFER CHEMICAL COMPANY, TG Soda Ash, Inc., General Chemical Partners, Tenneco Minerals Company, FMC Wyoming Corp., Kerr-McGee Chemical Corp., American Natural Soda Ash Corp.
• Court: U.S. District Court — Eastern District of Pennsylvania

767 F. Supp. 687

INTERNATIONAL RAW MATERIALS, INC. v. STAUFFER CHEMICAL COMPANY, TG Soda Ash, Inc., General Chemical Partners, Tenneco Minerals Company, FMC Wyoming Corp., Kerr-McGee Chemical Corp., American Natural Soda Ash Corp.

Civ. A. No. 87-7541.

United States District Court, E.D. Pennsylvania.

June 13, 1991.

David Berger (argued), H. Laddie Montague, Howard Langer (argued), Jeffrey Rockman of Berger & Montague, P.C., David W. Marston of Buchanan Ingersoll, P.C., Philadelphia, Pa., for International Raw Materials, Ltd.

Norman H. Seidler (argued), Charles H. Critchlow of Coudert Brothers, New York City, for American Natural Soda Ash Corp.

Patrick W. Kittredge and Joseph M. Donley of Kittredge, Donley, Fullem & Embick, Philadelphia, Pa., for American Natural Soda Ash Corp., General Chemical (Soda Ash) Partners, Stauffer Chemical Co., Rhône-Poulenc, Inc., TG Soda Ash, Inc. and FMC Wyoming Corp.

Edward J. Waite, III, Parsippany, N.J., for General Chemical (Soda Ash) Partners.

M. Mason Pattillo, Shelton, Conn., for Rhône-Poulenc, Inc.

Eugene G. McGuire, New York City, for TG Soda Ash, Inc.

Mark E. Ferguson of Kirkland & Ellis and Alan R. Kidston, Chicago, Ill., for FMC Wyoming Corp.

Stephen W. Armstrong of Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., and John M. Badger, Lakewood, Colo., for Tenneco Minerals Co.

Alfred H. Wilcox of Pepper, Hamilton & Scheetz, Philadelphia, Pa., Thomas W. Johnston of Keck, Mahin & Cate, Chicago, Ill., and Carolyn G. Hill, Oklahoma City, Okl., for Kerr-McGee Chemical Corp.

MEMORANDUM

LOUIS H. POLLAK, District Judge.

Defendants in this antitrust case are the nation's leading producers of soda ash. Together, they comprise the "American Natural Soda Ash Corporation" (ANSAC), an export trade association registered with the Federal Trade Commission (FTC) under the Webb-Pomerene Act, 15 U.S.C. § 61 et seq. Plaintiff International Raw Materials (IRM) is a Pennsylvania corporation that operates a shipping terminal in Port Longview, Washington, where it loads white dry bulk products, including soda ash, onto ocean-going vessels.

ANSAC and its members have moved for summary judgment against IRM's amended complaint, which asserts two causes of action under § 1 of the Sherman Act,¹ claiming to be exempt from ordinary application of the antitrust laws by virtue of their status as a Webb-Pomerene association. Under the Webb-Pomerene Act, "an association entered into for the sole purpose of engaging in export trade and actually engaged solely in such export trade" enjoys immunity from antitrust prosecution with respect to any "agreement made or act done in the course of export trade." 15 U.S.C. § 62. IRM denies that ANSAC qualifies for Webb-Pomerene immunity and has cross-moved for summary judgment on the basis of the virtually unrebutted substantive allegations recited in its complaint.

The central question before me, in resolving both motions for summary judgment, is whether ANSAC and its members have asserted a valid Webb-Pomerene defense.

I. Factual and Procedural Background

This case, like an export, comes to me having had a significant history somewhere else. This case was initiated before my colleague Judge Hannum. He, and the Court of Appeals on review of his grant of summary judgment, have both previously summarized relevant issues and facts. See International Raw Materials v. Stauffer Chemical, 716 F.Supp. 188, 191 (E.D.Pa. 1989), vacated and remanded, 898 F.2d 946 (3d Cir.1990).

Formed in 1983, ANSAC is an association of American soda ash producers, registered under the Webb-Pomerene Act. All ANSAC members are United States corporations whose principal places of business are in the United States. Yet, with one exception, every member of ANSAC is wholly or partly foreign owned or has major foreign connections: (1) Defendant Stauffer Chemical Company is wholly owned by the French corporation, Rhone Poulenc Chemie S.A., the third largest producer of soda ash in the world. (2) Defendant TG Soda Ash is wholly owned by the French chemical conglomerate, Societe Nationale Elf Aquitaine, a major manufacturer of caustic soda (a soda ash substitute). (3) Defendant General Chemical Partners is forty-nine percent owned by Australian Consolidated Industries, a major re-seller of soda ash. (4) Defendant Tenneco Minerals has entered into a joint venture with Japanese-owned ASAHI Glass, the largest Japanese producer of soda ash, to exploit Tenneco Minerals' soda ash reserves. (5) Defendant Kerr-McGee recently sold its soda ash reserves to North American Chemical Company, which is thirty-percent owned by the largest Korean producer of soda ash, Oriental Chemical Industries. (6) Only defendant FMC Wyoming Corporation is not linked to a foreign enterprise significantly engaged in the production or sale of soda ash or caustic soda.²

Prior to formation of ANSAC, the practice in the soda ash industry was for each producer to bargain individually for terminal rates and services. ANSAC changed this practice by negotiating on behalf of all of its members and demanding a common rate. As the operator of a principal terminal, IRM bargained for rates under both regimes. Its 1985 ANSAC-negotiated rate was significantly lower than the range of rates it had managed to negotiate with individual producers between 1982 and 1984; IRM attributes this reduction to the leverage imposed by ANSAC's collective bargaining. See 898 F.2d at 947-48.

In October of 1987, ANSAC moved its business from IRM to a rival terminal, operated by Hall Buck Marine Inc. (HBM), at the Port of Portland, Oregon. Less than a month later, IRM filed a one-count complaint in this district charging ANSAC and its members with conspiring to fix and depress prices for terminal services.³

IRM's complaint was dismissed on summary judgment by Judge Hannum, who concluded — on the basis of the complaint, the motion for summary judgment, and the motion's supporting affidavits⁴ — that ANSAC's trade practices "fall squarely within" the Webb-Pomerene exemption. 716 F.Supp. at 191. In so holding, Judge Hannum rejected IRM's contentions that ANSAC should be denied Webb-Pomerene status because (1) many ANSAC members are foreign owned, and (2) evidence may show that ANSAC's purpose in contracting with HBM "has gone beyond soda ash export and now, in reality, extends to the terminalling of white bulk chemical product," in contravention of the "sole purpose" clause of the Webb-Pomerene Act, see 15 U.S.C. § 62, which limits the exemption to export-related activity. Id. at 193.

On appeal, the Third Circuit vacated the grant of summary judgment, holding that at least one factual issue — the nature of the ANSAC-HBM relationship — required further development before ANSAC's Webb-Pomerene defense could be properly assessed:

Appellee says that there is nothing in his relationship with Hall Buck that affects his Webb-Pomerene status and appellant says that there is. We disagree with the district court's conclusion that `a more developed record is not required....' The district court cannot decide this issue properly until it has before it the facts as to the exact nature of that relationship.

898 F.2d at 950.

On remand, the case was reassigned to me because Judge Hannum was unwell. The parties then undertook discovery with respect to the ANSAC-HBM relationship.⁵ The details of that relationship are now clear: On October 26, 1987, ANSAC and HBM entered into a "Terminaling Agreement" (the Agreement) under which ANSAC agreed, for an initial period of five years, to export an annual minimum of 500,000 tons of soda ash through HBM's Port of Portland terminal at a rate which was substantially lower than that which it had previously bargained for with IRM. At the close of five years, ANSAC would have the option to renew the Agreement according to the same terms.⁶ If ANSAC should choose not to renew, the agreement provides as follows:

The estimated cost of construction of the Terminal is $4,300,000. On the basis of this estimate, and an assumption that the investment cost will be amortized over fifteen (15) years, at the end of the initial five-year term of this Agreement, there will be an unamortized cost of $2,866,667. In the event that ANSAC does not renew the contract after the initial five-year term, ANSAC shall pay to Hall-Buck $1,433,333 within thirty (30) days after completion of five years of operation, regardless of the actual investment cost and unamortized cost. ANSAC shall have the option, exercisable by written notice to Hall-Buck, to require that an economic arrangement be entered into between ANSAC and Hall-Buck providing for ANSAC's ownership, in consideration for making the above referenced payment, of 50% of the Terminal. In such event, Hall-Buck shall be given a contract to operate the Terminal for the duration of the lease on a basis to be negotiated between both parties. Parties agree that such 50 percent ownership interest by ANSAC is not intended to put ANSAC in the Terminalling business, but is rather intended to confer on ANSAC an appropriate equity interest in compensation for its contribution to the cost of the investment and that ANSAC shall have the right to sell, assign, or otherwise dispose of such ownership, provided however that Hall-Buck shall have the right of first refusal should ANSAC decide to sell its ownership interest. (Emphasis added). Article 6, ¶ 7.

In other words, the Agreement provides for an ongoing commitment of capital by ANSAC to HBM, either in the form of rates paid on a guaranteed level of annual throughput or — if ANSAC elects not to renew after five years — in the form of a direct cash contribution to the terminal's unamortized costs. If ANSAC elects non-renewal, ANSAC has the further option of acquiring a fifty percent interest in the terminal.

In more general terms, the Agreement describes the relationship between the parties as follows:

It is understood and agreed that Hall-Buck's

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