Thermice Corp. v. Vistron Corp., Civ. A. No. 79-2229.

• Decision Date: 18 July 1979
• Docket Number: Civ. A. No. 79-2229.
• Citation: 473 F. Supp. 1226
• Parties: THERMICE CORPORATION v. VISTRON CORPORATION and Airco, Inc.
• Court: U.S. District Court — Eastern District of Pennsylvania

473 F. Supp. 1226

THERMICE CORPORATION v. VISTRON CORPORATION and Airco, Inc.

Civ. A. No. 79-2229.

United States District Court, E. D. Pennsylvania.

July 18, 1979.

Franklin Poul, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, Pa., Michael K. Stanton, Weil, Gotshal & Manges, New York City, for plaintiff.

Patrick T. Ryan, Kenneth C. Frazier, Drinker, Biddle & Reath, Philadelphia, Pa., for Airco.

Larrick B. Stapleton, Clark, Ladner, Fortenbaugh & Young, Philadelphia, Pa., for Vistron.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

Plaintiff, Thermice Corporation (Thermice), a Pennsylvania corporation with its principal place of business in Pennsylvania, brings this action against defendants Vistron Corporation (Vistron), an Ohio corporation with its principal place of business in Ohio, and Airco, Inc. (Airco), a Delaware corporation with its principal place of business in New Jersey, seeking (1) to enjoin Vistron and Airco from making available to Airco a supply of carbon dioxide in accordance with a contract which Vistron and Airco contend requires Vistron to furnish Airco 69% of its available supply, and (2) to enjoin Vistron to make available to Thermice a supply of carbon dioxide in accordance with a contract between Vistron and Thermice which Thermice contends requires Vistron to make available to it quantities of carbon dioxide in amounts far greater than 31% of its available supply. On June 27, 1979, this Court issued a temporary restraining order.¹ Presently before the Court is plaintiff's motion for a preliminary injunction. A hearing was held concerning this motion on July 9, 1979. For the reasons hereinafter discussed, plaintiff's motion for a preliminary injunction is denied.

Plaintiff, Thermice, a subsidiary of Publicker Industries, Inc., is engaged in the manufacture and distribution of carbon dioxide, with its sole manufacturing facility in Muscatine, Iowa. Thermice manufactures and distributes carbon dioxide in the Midwestern marketing area, and distributes carbon dioxide in the Eastern marketing area. Thermice has approximately 120 customers in its Eastern market, an area which includes Pennsylvania, Connecticut, Rhode Island, Maine, Massachusetts, New Hampshire, New York, New Jersey, West Virginia, Delaware and Maryland. Customers in these states are supplied almost exclusively with carbon dioxide which Thermice purchases from Vistron under a long-term contract.

At the hearing on July 9, 1979, Thermice presented the testimony of Robert P. Richards, Executive Vice President of Thermice, and Joseph T. Brennan, National Distribution Manager of Thermice. Mr. Richards testified that Thermice requires more than 300 tons per day of carbon dioxide in addition to that produced at its Iowa plant in order to meet its contractual commitments. More than 200 tons per day are distributed in the Midwest region and approximately 100 tons per day are distributed in the Eastern region. He also testified that, in 1978, Thermice's Iowa plant produced approximately 37% of Thermice's total requirements of carbon dioxide, and Vistron provided approximately 53%. The remaining 10% was sold to Thermice by a Terre Haute, Indiana plant or purchased on the spot market.

Defendant Airco is engaged in the manufacture and distribution of carbon dioxide and is one of Thermice's competitors in the Eastern marketing area.² It has approximately 375 customers in the Eastern United States. Airco has a long-term supply contract for carbon dioxide with Vistron.

A cease and desist order was entered against Airco by the Federal Trade Commission, In the Matter of Pure Carbonic, Inc., et al., 44 F.T.C. 1029, 1072 (1948), enjoining Airco, among others, from entering into or carrying out agreements with manufacturers of carbon dioxide whereby it would agree to purchase the entire output or a substantial portion of their output. Two consent decrees entered against Airco in settlement of antitrust suits brought by the Department of Justice, United States v. Liquid Carbonic Corp., 1952 Trade Cas. ¶ 67,248 (E.D.N.Y.1952) and United States v. General Dynamics Corp., 1962 Trade Cas. ¶ 70,401 (E.D.N.Y.1962), included provisions enjoining Airco from taking action which would limit or restrict the production or sale of carbon dioxide.

Defendant Vistron operates an ammonia plant in Lima, Ohio and produces carbon dioxide as a by-product of the manufacture of ammonia. After using a certain quantity of carbon dioxide in its internal processes, Vistron sells the remainder. At full capacity Vistron produces approximately 550 tons of carbon dioxide per day, seven days per week, eleven months per year (the plant closes one month per year for maintenance). Vistron has long-term contracts only with Thermice and Airco for the purchase of carbon dioxide by them.

Shortages are a fact of life in the carbon dioxide industry. Because carbon dioxide is produced as a by-product in the manufacture of unrelated products, its supply varies according to the demand for the main product and not according to the demand for carbon dioxide. Shortages occur most frequently during periods when plants are shut down for maintenance work and during the summer months when demand for carbon dioxide is at its peak. To help deal with these shortages, carbon dioxide is available on a spot market whereby a carbon dioxide distributor can purchase products from other carbon dioxide distributors at a set price of $30 per ton. Availability of carbon dioxide on the spot market varies on a daily basis.

On July 20, 1970 Vistron and Airco entered into a written agreement for the purchase by Airco of quantities of carbon dioxide manufactured by Vistron at its Ohio plant. With respect to allocation, the contract stated:

Airco understands that Vistron has concurrent contracts to supply liquid and solid product from the facility. In accordance with these commitments and irrespective of any other provision hereof, Vistron will apportion to Airco sixty-nine (69) percent of the available supply of liquid product.

This contract was amended in part by an agreement between Vistron and Airco dated and to become effective on January 1, 1977. The price provision was amended to make the base price equal to $12 per ton. There was no amendment to the allocation provision of the original contract.

On October 8, 1970 Vistron and Thermice entered into a written contract for the purchase by Thermice of quantities of carbon dioxide manufactured by Vistron at the same Ohio plant. Paragraph 5 of this contract provided that "Vistron will make available to Thermice a maximum of 180 tons per day."³ In Paragraph 10a of the addendum to the original contract, the allocation provision stated:

Vistron will apportion the available supply of liquid carbon dioxide to each contract customer as of the date of the execution of this contract in direct proportion to its minimum commitment as outlined in ¶ 5. Quantities.

Paragraph 14c provided for a limit to the amount of carbon dioxide that Vistron has to supply to Thermice:

Vistron shall not be required to deliver a weekly average of more than one hundred eighty (180) tons of product per day and in no event more than the actual allocated production at the Facility for any month plus the amount of production held in allocated inventory by Vistron at the beginning of such month.

This contract was amended in part by an agreement dated and to become effective on January 1, 1977. Under this agreement, the price provision was amended to make the base price $12.12 per ton. Paragraph 5 was amended to provide that "Vistron will make available to Thermice a maximum of 270 tons per day." Paragraph 10a of the original contract was replaced with the following:

The available supply of carbon dioxide will be apportioned by Vistron to each contract customer based on its individual commitments as a percent of total commitments and adjusted for recent actual taking by each such customer against its individual commitment.

The term "recent actual taking" is not defined in either the original contract or the amendment of January 1, 1977. There was no amendment concerning Paragraph 14c of the original contract, which provided that Vistron only had to provide to Thermice an average of 180 tons per day of carbon dioxide.

Prior to the amendments of January 1, 1977, during periods of allocation when carbon dioxide was in short supply, Airco received 69% of the available product and Thermice received 31% in accordance with the original contracts. Subsequent to these amendments and until May 16, 1979, Vistron allocated carbon dioxide to Thermice during periods of short supply on the basis of its recent actual taking. Thermice presented testimony that the details of the "recent take" formula were provided to it orally by Jim Dietz, plant manager of Vistron's Ohio plant. During the allocation periods between January 1, 1977 and May 16, 1979, Thermice received between 44% and 56% of Vistron's available supply, and Airco received less than the 69% specified in its contract with Vistron. On or about May 17, 1979, Airco demanded that it receive the 69% called for in the allocation provision of its contract during short supply periods. In the short supply period from May 16, 1979 to May 29, 1979, Thermice was allocated 31% of Vistron's available supply of carbon dioxide and Airco was allocated 69%. Thermice contends that, on the basis of the "recent take" formula, it was entitled to 59% of Vistron's available supply during the May 16 to May 29 period. During the most recent allocation period, from June 11, 1979 to June 19, 1979 (the day on which the complaint was filed), Thermice was allocated 31%, and it contends that it was entitled to 56% of Vistron's available supply in accordance with the "recent take" formula. Thermice seeks a preliminary injunction which will order Vistron to make available to it during periods of short supply quantities of carbon dioxide on the basis of its...