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GREAT LAKES CARBON CORP. v. KOCH INDUS.

September 18, 1980

GREAT LAKES CARBON CORPORATION, Plaintiff,
v.
KOCH INDUSTRIES, INC., Koch Carbon, Inc. and E. Thomas Fish, Defendants



The opinion of the court was delivered by: POLLACK

OPINION AND DECISION

The plaintiff, Great Lakes Carbon Corporation, filed suit on August 8, 1980 against its former employee, defendant E. Thomas Fish, for an injunction and damages claiming that Mr. Fish had breached his fiduciary duties to and an employment contract with plaintiff by taking employment in May 1980 with one of plaintiff's competitors and using confidential and trade secret information of the plaintiff in his new employment to the detriment of plaintiff. Named as co-defendants, were Mr. Fish's new employer, Koch Carbon, Inc. and its parent, Koch Industries, Inc.

 Jurisdiction was posited on complete diversity of citizenship of the parties and requisite amount in suit. However, plaintiff, a Delaware corporation, being satisfied shortly after filing of the suit that defendant Koch Carbon, Inc., the new employer of Mr. Fish, is also a Delaware corporation, promptly filed a voluntary dismissal of said defendant from this suit, without prejudice. Rule 41(a)(1)(i), Fed.R.Civ.P.

 Plaintiff moved for a preliminary injunction, which was denied and a prompt trial of the merits was ordered. The issues were tried at a Bench trial on September 8th and 9th, 1980 and at the conclusion of the trial, the complaint against defendant, Koch Industries, Inc.-a Kansas corporation-was dismissed for absence of evidence to sustain a claim for relief against that defendant; it is not the employer of Mr. Fish and no activity or connection with the employment of Mr. Fish or the matters asserted in the claims herein was claimed or shown. Decision was reserved on the claims against Mr. Fish.

 For reasons appearing hereafter, the complaint against Mr. Fish must be dismissed, on the merits.

 I.

 Great Lakes alleged four claims for relief in its complaint: (1) breach of contract by Mr. Fish, (2) misappropriation of confidential information, (3) inducement by the corporate defendants of Mr. Fish to breach his contract, and (4) tortious interference by defendants with the business relations between Great Lakes and its suppliers of petroleum coke.

 Mr. Fish denied plaintiff's claims and asserted his good faith and fair dealing in all matters pertaining to his employment, the severance thereof and in his activities in his new employment. Koch Industries, Inc. denied any connection at all with the claims in suit.

 II.

 Great Lakes is a private company whose principal business is the manufacture and distribution of carbon and graphite products such as electrodes used in the manufacture of steel and special carbon products. Petroleum coke-a by-product of petroleum refining-is the principal component and in some instances the only component of the items sold by Great Lakes.

 Petroleum coke is a solid residue after distillation of petroleum feed stock. The country's oil refiners sell the unprocessed petroleum coke to users and to those who in effect act as distributors or brokers for customer users. The petroleum coke is graded on the basis of levels of impurities. The less pure coke is used for fuel, the purer coke is subjected to calcining-a dehydrogenation process to drive off volatile matter by placing the coke in a controlled high temperature. Great Lakes is the country's largest purchaser of unprocessed petroleum coke, handling about 35 percent of the market. There are approximately 56 refineries under the control of 32 companies producing petroleum coke and Great Lakes had short term supply agreements negotiated by Mr. Fish on its behalf with about 19 of the 56 suppliers.

 There is no mystery concerning the identity of the refineries that have supplies of petroleum coke for sale. Each year in March the "Oil and Gas Journal" publishes a list of each of the major petroleum companies and their refineries from which petroleum coke producers may be determined, with an indication of the daily tonnage production of each refinery. The publishers of that Journal also publish a book entitled "USA Oil Industry Directory" which identifies the specific individuals at each refinery who are in charge of selling coke. The oil refineries readily disclose, as a matter of general practice, the period of petroleum coke contracts, the quality of the coke and the production rate, and the price opener terms in such contracts, the periods (quarterly or semi-annually) during the term of the contract at which the contract becomes open for rebidding, i. e., when someone else may also bid for the balance of the contract. The refineries readily disclose this information because they are anxious to develop the competition among potential purchasers of petroleum coke. There is an outstanding Federal Trade Commission industry-wide order which requires the manufacturers of petroleum coke to advise all potential purchasers thereof of any supply of petroleum coke which becomes available for bid. This order also requires that all contracts for purchase of petroleum coke shall be for no more than three years. In the Matter of Great Lakes Carbon, 82 F.T.C. 1529 (1973).

 Since 1976, Koch Carbon, Inc. has aggressively sought supplies of petroleum coke from virtually every manufacturer in the United States; it has bid every supply that has come up. Prior to employing Mr. Fish, Koch Carbon, Inc., with but two exceptions, had contracted with, made bids to, or had substantial contacts with every one of the suppliers with whom Mr. Fish had formerly negotiated on behalf of Great Lakes. This includes the principal suppliers of petroleum coke, particularly, Amoco, Getty, ARCO, Texaco and Chevron.

 Since about 1973, with certain limited exceptions, the worldwide price for petroleum coke has increased. There have been temporary periods when the worldwide demand for petroleum coke has exceeded the available supply due to fluctuating conditions pertaining to oil refining and other times when there has been a surplus of supplies. In the latter situation, as for example in 1978, when the price was diminishing, purchasers went often to suppliers for price relief on existing contracts and obtained relief in the form of price decreases by revealing their internal and external cost figures and the prices at which they sell to their customers. Great Lakes has obtained price relief on the basis of such disclosures from Amoco, Mobil, Sun, Getty, NCRA, Texaco and possibly others. Great Lakes made no secrecy agreements with any supplier concerning the disclosure of such internal and external costs and selling prices in respect to petroleum coke.

 III.

 The defendant E. Thomas Fish was employed on an at-will basis during his entire 26 year connection with Great Lakes. He began his career with plaintiff in 1954 and he worked for them continuously until 1973, when he was asked to transfer from the West Coast to the East Coast. For personal and family reasons, Mr. Fish was unwilling to make the transfer, so he resigned to seek other employment outside of the petroleum coke business. After six months, however, he asked to be reinstated with Great Lakes, accepting the transfer to the East Coast. He was reinstated, but Great Lakes nonetheless refused to credit him with his 19 years seniority toward pension rights.

 Mr. Fish started his employment as a process engineer for graphite electrodes. During subsequent years, until 1973, he served as a research engineer, salesman and sales manager. When he was re-employed after the 1973 break in employment, he was named ...


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