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Huntsman International, LLC v. Dow Chemical Co.

Superior Court of Delaware

October 3, 2018

HUNTSMAN INTERNATIONAL, LLC, and HUNTSMAN HOLLAND B.V., Plaintiffs,
v.
DOW CHEMICAL COMPANY, and DOW BENELUX N.V., Defendants.

          Submitted: May 10, 2018

         On Defendants' Motion to Dismiss - DENIED

          John C. Phillips, Jr., Esquire, and Lisa C. McLaughlin, Esquire, of Phillips, Goldman, McLaughlin & Hall, P.A., and John N. Scholnick, Esquire, and Joseph A. Roselius, Esquire, of DLA Piper LLP, Attorneys for Plaintiffs.

          Kenneth J. Nachbar, Esquire, and Sabrina M. Hendershot, Esquire, of Morris, Nichols, Arsht & Tunnell LLP, and David J. Lender, Esquire, and Samuel J. Zeitlin, Esquire, of Weil, Gotshal & Manges LLP, Attorneys for Defendants.

          MEMORANDUM OPINION

          William C. Carpenter, Jr. Judge.

         Before this Court is Defendants' Dow Chemical Company and its Dutch affiliate Dow Benelux N.V.'s (collectively "Dow") Motion to Dismiss Huntsman International LLC and Huntsman Holland B.V.'s (collectively "Huntsman") Complaint.

         I. FACTUAL & PROCEDURAL BACKGROUND

         The dispute in this case arises from a contract between Dow and Huntsman, under, which Dow manufactures industrial chemicals called ethyleneamines and provides them to Huntsman at cost.[1] Their arrangement was a byproduct of Dow's purchase of Union Carbide Corporation in 2001.[2] Prior to the merger, Dow and Union Carbide were the only producers of ethyleneamines in the United States and Canada, and to resolve anti-trust concerns raised by the Federal Trade Commission, Dow entered a consent decree requiring it to sell its pre-merger ethyleneamines business to Huntsman.[3]

         As part of the divestment, Dow kept control of the ethyleneamines plant located at its facility in Terneuzen, the Netherlands (the "Terneuzen Plant").[4] At that location, Dow produces ethyleneamines, but it is required under the contract to sell up to half of the Terneuzen Plant's output to Huntsman at the cost of production and receive no profit.[5] The Terneuzen Plant is one of seventeen plants at Dow's Terneuzen facility ("Terneuzen Facility"), Dow's second-largest production site world-wide. The Agreement provides that Dow will send Huntsman an invoice after every quarter for the amount of Product delivered in that quarter. The invoice total is calculated by Dow's cost to operate and maintain the Terneuzen Plant, as well as the cost to produce, store, handle, and deliver the Product and the raw materials used to manufacture the Product.

         On January 14, 2014, a barge owned by an unrelated third-party crashed into Dow's jetty at the Terneuzen Facility, causing heavy damage. Dow used that jetty to receive raw materials for the Terneuzen Plant and to deliver ethyleneamine to Huntsman. However, at the time of the accident, the barge was not delivering raw materials for use or otherwise engaged in activities related to the Terneuzen Plant and the production of ethyleneamine. Dow made repairs to the jetty, but did not inform Huntsman of the accident and Huntsman claims it did not otherwise know the accident occurred. On November 30, 2015, Dow sent Huntsman three invoices that purportedly allocated Huntsman its share of the jetty repair costs. The invoices included a summary charge, but did not explain how Dow allocated the charges among its customers and did not provide the total repair cost. Upon receiving the invoices, Huntsman disputed its obligation to pay for the jetty repairs. On November 3, 2017, Dow sent a notice to Huntsman stating it intended to terminate the Agreement if Huntsman did not pay the November 2015 invoices within fifteen days. On November 17, 2017, Huntsman paid Dow $1, 736, 095.32 for the jetty repairs ("Repair Payment") under protest and with full reservation of its rights.

         On November 22, 2017, Huntsman brought this action seeking a declaration that (1) Huntsman had no contractual obligation to pay for the jetty repairs and (2) Huntsman was entitled to recover the Repair Payment, along with pre- and post-judgment interest and attorneys' fees. On January 29, 2018, Dow filed its Motion to Dismiss and the parties briefed and argued the Motion.

         II. STANDARD OF REVIEW

         On a motion to dismiss, a court must determine whether the "plaintiff may recover under any reasonably conceivable set of circumstances susceptible of proof."[6] "If [the plaintiff] may recover, the motion must be denied."[7] A court may grant the motion if "it appears to a reasonable certainty that under no state of facts which could be proved to support the claim asserted would plaintiff be entitled to relief."[8] When applying this standard, the Court will accept as true all non- conclusory, well-pleaded allegations.[9] In addition, "a trial court must draw all reasonable factual inferences in favor of the party opposing the motion."[10] At this preliminary stage, dismissal will be granted only when the Court is able to determine with "reasonable certainty" that plaintiff would not be entitled to relief "under any set of facts that could be proven to support the claims asserted" in the complaint.[11]

         III. DISCUSSION

         Dow raises two arguments in its Motion to Dismiss. First, Dow contends Huntsman cannot recover the Repair Payment because Huntsman did not allege duress and the payment therefore was voluntary. Second, Dow argues that the terms of the Agreement unambiguously require Huntsman to pay for cost to manufacture the product, which includes delivery of raw materials by way of the jetty. Dow argues that because the jetty services the entire Terneuzen Facility, Huntsman is obligated to pay its portion of the jetty repairs.

         In response, Huntsman first argues it may recover the Repair Payment because it properly reserved its rights under 6 Del. C. § 1-308. Huntsman argues Section 1-308 allows a party to reserve its rights without alleging duress. Second, Huntsman argues the contractual provisions raised in Dow's arguments do not require Huntsman to pay for the jetty repairs because the jetty serviced other plants at Dow's Terneuzen Facility and was unrelated to the Terneuzen Plant.

         A. HUNTSMAN MAY SUE UNDER RESERVATION OF RIGHTS AND HAS ADEQUATELY PLEADED DURESS

         Dow argues Huntsman cannot recover the Repair Payment because Huntsman did not allege duress and the payment therefore was voluntary. In support of its argument, Dow cites Western Nat. Gas Co. v. Cities Serv. Gas Co., [12] in which the Delaware Supreme Court held "[a] payment under protest is not necessarily involuntary, nor is it made so by unilaterally calling it involuntary at the time of payment[] but where money is paid because of duress, the payment is involuntary."[13] Dow asserts that Huntsman cannot preserve its rights to sue unless it alleges duress. Dow contends the Complaint fails to adequately plead duress because (i) threatening to terminate a contract is not a wrongful act; (ii) Huntsman did not allege the threat was sufficient to break its free will; and (iii) Huntsman could have sought injunctive relief in court within the fifteen days of the ultimatum.

         In its answering brief, Huntsman argues 6 Del. C. § 1-308 supersedes Western by permitting parties to reserve their rights without pleading duress. While the Court believes the Complaint adequately alleges Dow's ultimatum constituted duress, it agrees ...


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