Virginia Vermiculite v. W.R. Grace & Co.-Conn., Civil Action No. 3:96CV00012.

CourtUnited States District Courts. 4th Circuit. United States District Court (Western District of Virginia)
Citation108 F.Supp.2d 549
Decision Date26 July 2000
Docket NumberCivil Action No. 3:96CV00012.,Civil Action No. 3:96CV00013.,Civil Action No. 3:95CV00015.
PartiesVIRGINIA VERMICULITE, LTD., Plaintiff, v. W.R. GRACE & CO.-CONN., and The Historic Green Springs, Inc., Defendants. Virginia Vermiculite, Ltd., Plaintiff, v. W.R. Grace & Co.-Conn., Defendant. M.F. Peers, Jr., Norma Peers, and Virginia Vermiculite, Ltd., Plaintiffs, v. W.R. Grace & Co.-Conn., Defendant.

Roger Scott Martin, Martin & Woodard, PLC, Charlottesville, VA, Jane Champion Clarke, David Zev Izakowitz, Woods, Rogers & Hazlegrove, P.L.C., Lewis & Clark, Charlottesville, VA, for Virginia Vermiculite, Ltd.

Thomas Eugene Albro, Patricia D. McGraw, Tremblay & Smith, Charlottesville, VA, Randolph S. Sherman, David S, Copeland, Eric A. Aaronson, Kaye, Scholer, Fierman, Hays & Handler, New York City, for W.R. Grace & Co.-Conn.

Michael Eugene Derdeyn, McGuire, Woods, Battle & Boothe, Charlotesville, VA, Charles H. Montange, Seattle, WA, Sara Lee Gropen, Rae H. Ely & Associates, Louisa, VA, for Historic Green Springs, Inc.


MICHAEL, Senior District Judge.

These consolidated actions come before the court on cross-motions for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Having thoroughly considered the substantial briefing and evidence provided by the parties, and having heard oral argument from counsel on the motions, and for the reasons hereinafter set forth, the court shall GRANT the plaintiffs' motion in part, DENY the plaintiffs' motion in part, GRANT the defendants' motions in part, and DENY the defendants' motions in part. As a result of this Memorandum Opinion and Order, the plaintiffs' only claims remaining for trial are: VVL's claim for conspiracy to monopolize pursuant to the Sherman Antitrust Act § 2; VVL's corresponding conspiracy to monopolize claim under the Virginia Antitrust Act; and all of the plaintiffs' non-antitrust state law claims, except for unjust enrichment.


The plaintiffs filed these antitrust cases for violations of sections one and two of the Sherman Antitrust Act, see 15 U.S.C.A. §§ 1, 2 (West 1997 & Supp.2000) ("§ 1" and "§ 2"), and related laws of the Commonwealth of Virginia. The plaintiffs' claims arise out of a series of land donations from defendant W.R. Grace & Co.-Conn. ("Grace"), to defendant The Historic Green Springs, Inc. ("HGSI"), a Virginia nonprofit organization dedicated to the preservation of land in Louisa County, Virginia. Plaintiff Virginia Vermiculite, Ltd. ("VVL"), Grace's competitor, and plaintiffs Millard F. Peers, Jr. and Norma Peers (collectively, "M.F.Peers"), residents of Louisa County, attack the donations, inter alia, as conspiratorial efforts to drive VVL out of business, and to restrain trade and monopolize the industry in which VVL and Grace compete.

The following facts are undisputed, unless otherwise noted. VVL is a Virginia corporation engaged in the business of mining, processing, and selling a mineral known as vermiculite. Vermiculite is a naturally-occurring, mica-like mineral found in the ground. When vermiculite is mined, the ore is taken to a processing plant relatively close to the mining site, and processed to remove moisture, rock, dirt, dust, extraneous material, and small particles of vermiculite that are not merchantable. The result of the mining process is vermiculite concentrate, which is separated by grade according to the size of the flakes. The United States grading system classifies vermiculite into three size ranges: grade 3, grade 4, and grade 5. The plaintiffs generally refer to grade 3 as "mid-size" vermiculite concentrate, grade 4 as "small" vermiculite concentrate, and grade 5 as "ultra-small" vermiculite concentrate. The defendants dispute the plaintiffs' classification system. Most applications for vermiculite require that the concentrate be heated, a process known as "exfoliation" or "expansion." This process causes the vermiculite to expand or pop in much the same way as popcorn pops when heated.

Vermiculite is fireproof, and is used in a variety of horticultural, agricultural, industrial, and construction applications. Some of the applications for expanded vermiculite include the production of lightweight concrete, soil mixes, fertilizers, masonry block insulation, and spray-on fireproofing. Vermiculite concentrate is used to produce fire-rated drywall.

Vermiculite is mined in a limited number of specific locations throughout the world, including China, Brazil, Australia, and Russia, and certain countries in Africa. It is imported primarily from companies doing business in South Africa and China. In the United States, vermiculite has been mined only in Virginia, South Carolina, and Montana, but deposits in Montana previously were found to be contaminated by asbestos fibers. Grace also asserts that vermiculite deposits exist in Colorado, Nevada, North Carolina, Texas, and Wyoming, but VVL claims that these deposits currently are not commercially viable, due in part to their low-quality.

The three largest participants in the world-wide vermiculite industry are the South Africa-based Palabora Mining Company ("Palabora"),1 Grace, and VVL. Palabora is the largest single producer of vermiculite in the world, and currently has twenty-five years' worth of reserves (sometimes referred to as "mining rights") in Africa. Grace and VVL are the second-and third-largest vermiculite producers in the world, respectively, and until recently, the only American competitors in the vermiculite industry.2 In 1991, South Africa and China sold approximately 41,000 tons of vermiculite in North America, representing 23% of North American vermiculite sales. Since then, these imports increased substantially, to approximately 86,000 tons in 1998. In 1998, South African and Chinese imports represented approximately 33% of all North American vermiculite concentrate sales. The parties dispute the impact these foreign imports have on the domestic market.

VVL owns mining rights, conducts mining operations, and operates vermiculite processing plants in Virginia and South Carolina. VVL's South Carolina division does not process any vermiculite mined in Virginia. In 1991, VVL sold approximately 57,000 tons of vermiculite concentrates in North America. Since then, VVL increased its sales to approximately 80,000 tons in 1998. VVL currently sells approximately 30% of all vermiculite concentrate in North America. At its current production rates, VVL controls enough reserves in Virginia to last until the year 2012. VVL has approximately eight years of additional reserves in South Carolina.

Grace, a Connecticut corporation, currently conducts mining operations only in South Carolina. It previously mined in Montana (but ultimately closed those operations), and never mined in Virginia. However, Grace did control substantial mining rights in Louisa County, Virginia — 74-80% of available mining rights in the county — before its donations to HGSI in 1992.3 The plaintiffs allege that Grace also controlled approximately 82% of the mining rights in South Carolina, with VVL's South Carolina operation controlling the remaining 18%. (The defendants dispute this.) At least 2,000,000 tons of vermiculite reserves in South Carolina remain unleased by any mining company. Grace sells and uses vermiculite internally, and also sells both vermiculite concentrates and expanded vermiculite to third-parties. In 1991, Grace sold 86,157 tons of vermiculite in North America, representing approximately 47% of all North American vermiculite concentrate sales. By 1998, Grace sold approximately 38% of all vermiculite concentrates in North America.

In the 1960s, Grace began exploring the possibility of purchasing vermiculite reserves in Louisa County. At that time, Grace was mining in Montana and in South Carolina, and believed it would need a "third mill" to replace depleting reserves or to add to existing reserves. To that end, Grace acquired substantial mining rights in Louisa County throughout the 1970s, either by buying properties containing vermiculite, or by leasing land from Louisa County property owners.4

Plaintiff M.F. Peers was one of those property owners. Grace purchased two properties from M.F. Peers on December 27, 1972. The first parcel (sometimes referred to as "Parcel I") contains 262.98 acres, and the second parcel (sometimes referred to as "Parcel II") contains 276.42 acres.5 Grace purchased these properties for their logistical benefit to a vermiculite mining operation; it did not believe at that time that commercially valuable reserves existed on either parcel. (The parties dispute whether Grace so informed M.F. Peers.) Despite this belief, Grace entered into an agreement with M.F. Peers pursuant to which Grace would pay M.F. Peers "per ton" royalties if Grace, in its sole discretion, decided to mine the properties. Grace never mined the properties or paid a per ton royalty to M.F. Peers.

Alfred D. Peers (M.F. Peers's brother) and Elizabeth D. Peers, husband and wife (collectively, "A.D.Peers"), also owned land in Louisa County. Grace purchased two parcels from A.D. Peers on December 27, 1973: the 36.62 acre "Parcel A," on which A.D. Peers resided, and the 228.99 acre "Parcel B." An unrecorded agreement entered the same day established a per ton royalty rate that Grace would pay A.D. Peers, in the event that Grace, in its sole discretion, decided to mine the property. Grace believed that the A.D. Peers properties contained commercially valuable vermiculite reserves. Grace never mined the A.D. Peers properties or paid a per ton royalty to A.D. Peers.

J. Murray and Ruth Hill also owned property in Louisa County, known as the "Brandy Farm." On December 27, 1973, Grace leased a 60.24 acre parcel from the Hills known as "Brandy A."...

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