Virginia Vermiculite v. W.R. Grace & Co.-Conn.

• Decision Date: 22 April 1997
• Docket Number: Civil Action No. 96-0013-C.,Civil Action No. 96-0012-C.,Civil Action No. 95-0015-C.
• Citation: 965 F.Supp. 802
• Court: U.S. District Court — Western District of Virginia
• Parties: VIRGINIA VERMICULITE, LTD., Plaintiff, v. W.R. GRACE & CO.-CONN., The Historic Green Springs, Inc., Defendants. VIRGINIA VERMICULITE, LTD., Plaintiff, v. W.R. GRACE & CO.-CONN., Defendant. M.F. PEERS, Jr. & Norma Peers, Virginia Vermiculite, Ltd., Plaintiffs v. W.R. GRACE & CO.-CONN., Defendant.

965 F.Supp. 802

VIRGINIA VERMICULITE, LTD., Plaintiff, v. W.R. GRACE & CO.-CONN., The Historic Green Springs, Inc., Defendants.

VIRGINIA VERMICULITE, LTD., Plaintiff, v. W.R. GRACE & CO.-CONN., Defendant.

M.F. PEERS, Jr. & Norma Peers, Virginia Vermiculite, Ltd., Plaintiffs v. W.R. GRACE & CO.-CONN., Defendant.

Civil Action No. 95-0015-C.

Civil Action No. 96-0012-C.

Civil Action No. 96-0013-C.

United States District Court, W.D. Virginia, Charlottesville Division.

April 22, 1997.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Jane Champion Clarke, David Zev Izakowitz, Woods, Rogers & Hazlegrove, P.L.C., Charlottesville, VA, for Virginia Vermiculite, Ltd.

Roger Scott Martin, Martin & Woodard, P.L.C., Charlottesville, VA, for M.F. Peers, Jr., Norma Peers.

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

Charles H. Montange, Seattle, WA, Sara Lee Gropen, Rae H. Ely & Associates, Louisa, VA, for Historic Green Springs, Inc.

MEMORANDUM OPINION

MICHAEL, District Judge.

This case comes to the court pursuant to 28 U.S.C. § 636(b)(1) on objections to United States Magistrate Judge B. Waugh Crigler's Reports and Recommendations, the first issued on September 19, 1995, and the second issued on September 19, 1996, in the above-captioned cases. Also, before the court is a motion to amend one of the complaints, filed on October 18, 1996. Because the three above-captioned cases are closely related, the court will resolve all outstanding issues in a single opinion.

I. MOTION TO AMEND COMPLAINT

Plaintiff Virginia Vermiculite, LTD. ("VVL") moves the court to permit it to amend its First Amended Complaint. Defendant W.R. Grace & Co.-Conn. ("Grace") does not object; Defendant The Historic Green Springs, Inc. ("HGSI"), however, opposes the motion to amend, if only tepidly so. See Transcript of January 31, 1997 Hearing at 6-7.

Fed.R.Civ.P. 15(a) directs that "leave [to amend a complaint] shall be freely given when justice so requires." According to its own statement Grace will suffer no prejudice from the amendment. As will become clear from the discussion below, neither will HGSI be prejudiced by an amendment. Meanwhile, VVL's amendment removes allegations that no longer hold true and adds relevant allegations not made in its earlier complaints. The court sees no reason — given Grace's acquiescence — to analyze the case on an outdated complaint. Therefore, the court will grant VVL's motion to amend.

II. BACKGROUND

The court is presented with the novel argument that the federal antitrust laws require nullification of a donation to a nonprofit preservation organization. Attacking the donation are the donor's business competitor and two landowners who entered into a contract with the donor. The subject of the donation and the substance around which these peculiar cases revolve is a substance called vermiculite. "Vermiculite is a unique mineral in that it is fireproof and rapidly expands approximately ten-fold in volume when heated to produce a low-density material. Vermiculite has valuable uses throughout the United States in fire safety, energy conservation, construction, environmental products, food processing and horticulture. Vermiculite also has promising new applications including detoxification of water and soil, nuclear waste containment and removal, and industrial spill containment and cleanup." Second Amended and Supplemental Complaint ("Second Amended Complaint") ¶ 10, Virginia Vermiculite, Ltd. v. WR Grace & Co.-Conn., No. 95-0015-C (October 18, 1996). Vermiculite is obtained through mining; after it is removed from the ground, it must be taken to a processing plant (relatively close to the mining site) and separated from the rock, dirt, and clay in which it is embedded. Id. ¶ 11. In the United States, vermiculite is currently mined in South Carolina and Virginia, the only two states where substantial vermiculite reserves are known to exist, other than Montana, whose deposits are believed to be contaminated. Id. ¶¶ 16, 17. A significant portion of vermiculite is also obtained from South Africa; for instance, in 1992, approximately eighteen percent of all vermiculite sold in the United States was imported from South Africa. Id. ¶ 19. In the past, however, foreign exporters of vermiculite have not responded to fluctuations in vermiculite price in the United States. Id. ¶ 21.

VVL, a Virginia limited partnership, mines and sells vermiculite; hence, it is a consumer of vermiculite mining rights and a producer of vermiculite concentrates. Id. ¶ 63. It has been involved in vermiculite mining in Louisa County, Virginia since 1976. Id. ¶¶ 4, 13. VVL sells a substantial percentage of all vermiculite sold in the United States; in 1992, its share of the market was approximately twenty-three percent of all sales. Id. ¶ 19. Its only formidable domestic competitor is Grace, a Connecticut corporation; in 1992, Grace owned more than eighty percent of vermiculite mining rights (in Louisa County, Virginia and South Carolina) and was responsible for approximately fifty-seven percent of all vermiculite sold in the United States. Id. ¶¶ 5, 19, 26. Until 1990, Grace mined vermiculite in South Carolina and Montana only, even though it owned vermiculite mining rights in Louisa County; after 1990, Grace abandoned the mines in Montana, apparently because of the contamination, but continued mining in South Carolina. Id. ¶¶ 14, 15, 17.

In 1991, Grace invited VVL to make an offer to purchase all of Grace's holdings in Louisa County. Id. ¶¶ 23. VVL submitted an offer, which Grace rejected.¹ Id. ¶ 24. Instead of making a counter-offer, Grace donated its holdings to a nonprofit Virginia corporation, HGSI. Id. ¶¶ 6, 25, 37, 38, 43, 44, 51, 53. Grace's "compensation" for the donation came from the Internal Revenue Service in the form of a hefty tax deduction. Id. ¶ 25. For HGSI, the benefit of the donation exceeded the simple pecuniary gain of land and mining rights.

Since the early 1970s, HGSI's stated purpose has been to halt all vermiculite mining and other land development that adversely impacts land (values) in Louisa County, Virginia. Id. ¶¶ 29, 32, 33, 34, 35. Indeed, for some twenty years, HGSI has fought to acquire vermiculite mining rights and has "conducted a campaign" against Grace to persuade Grace to surrender its mining rights in Louisa County to HGSI. Id. ¶ 36. HGSI's corporate charter announces its purpose as follows:

[HGSI] is organized for charitable and educational purposes: to maintain and protect the beautiful and historic Green Springs area[, a designated national historic landmark] as an important heritage for the State of Virginia and her people, without pecuniary gain or profit to its members or to any private individual and not to engage in a regular business of a kind ordinarily carried on for profit. Its purposes shall include historical and ecological research and education; the development of a community land-use plan to eliminate blight and prevent future deterioration; rendering assistance to like oriented organizations (historical and environmental).

Id. ¶¶ 29, 30.

Grace's first donation to HGSI, made in 1992, was accompanied by restrictive covenants imposed to "run with the land and be binding upon [HGSI] and upon all persons, firms, partnerships, corporations, limited liability companies, and all other legal entities of any type owning all or any part of the Real Estate." Id. ¶ 43. The covenant further directed that HGSI "agrees for itself and all of its successors in title or interest, and its assigns, that the Restrictive Covenants shall run with the land." Id. The Restrictive Covenants prohibited any part of the land ever to "be used or operated for the purpose of Mining or Mineral Production," id., without regard to the possibility of successful reclamation. Id.

As a result of an unsuccessful suit HGSI brought to prevent mining by VVL — which owned mining rights to a property adjoining one of the 1992 conveyances to HGSI — the restrictive covenants were found by a Virginia state court to have breached the implied covenant of good faith. Id. ¶¶ 44-49. After the state court ruling invalidated these restrictive covenants, Grace made another donation to HGSI in 1994, this time without a recorded restriction on mining. Id. ¶¶ 49, 51. The restrictions contained in the 1992 conveyances were subsequently narrowed by the parties to prohibit only vermiculite mining as opposed to all mining. Id. ¶¶ 53, 55.

As a consequence of the 1992 and 1994 transactions, VVL brought suit against Grace and HGSI on February 21, 1995. At the Magistrate's request,² on May 31, 1995, VVL filed its First Amended Complaint. Because the court has granted VVL's motion to amend this complaint, now before the court is VVL's Second Amended Complaint. VVL believes it has been injured both as a consumer (of mining rights) and a producer (of vermiculite concentrate) by the contract between Grace and HGSI, which VVL claims to have resulted in the suppression of eighty percent of the vermiculite supply in Louisa County and forty percent of the vermiculite supply in the United States. Id. ¶¶ 59, 60. According to VVL, the contract (whether explicit or implicit) prohibiting all future mining of vermiculite unreasonably burdens trade through its restraint of the "vermiculite mining rights market" in Louisa County and South Carolina and the "vermiculite concentrates market" in the United States. Id. ¶¶ 68, 76, 79, 90, 93, 101. VVL complains that the contract between Grace and HGSI in which they agree (expressly or implicitly) that no vermiculite mining will ever be performed, hinders it (or other potentially interested parties) from acquiring vermiculite mining rights, mining vermiculite, and selling vermiculite. Id. ¶ 70. The...