piercing the corporate veil. Courts have identified several factors relevant in determining whether a parent and a subsidiary operate as a single economic entity. Those factors include whether the corporation was solvent and adequately capitalized, whether corporate formalities were observed, and whether the corporation functioned in general "'as a facade for the dominant shareholder.'" Fletcher, 68 F.3d at 1458 (quoting Harco Nat'l Ins. Co. v. Green Farms, Inc., No. CIV. A. 1331, 1989 WL 110537, at *5 (Del. Ch. Sept. 19, 1989)). However, Defendants have cited no decision holding that the absence of allegations of specific Fletcher factors justifies granting a motion to dismiss where the plaintiff has made other relevant allegations.
In this case, UCC has made numerous other allegations that support its assertion that the Shell/Montell defendants dominated SOC and forced SOC to act contrary to its own interests. For example, UCC alleges that SOC discontinued discussions regarding expansion of the UCC/Shell Venture through Project Nautilus in order to further the interests of RDS. Cplt PP 132, 274. In addition, in 1992 SOC reduced its research and development expenditures by approximately thirty percent, and reduced the number of SOC staff assigned to polypropylene research and development by ten percent. Id. P 144. In 1994, SOC officials testified before the European Commission that SOC was "neither an advocate nor an adversary of the proposed merger," despite the fact that Montell posed competitive harm to SOC. Id. PP 149, 151, 105-22. SOC also offered to take other steps to the detriment of the UCC/Shell Venture, including terminating its relationship with UCC, in order to allow the Montell transaction to be approved by the EC. Id. P 151; see also id. PP 87, 111, 153-55. These assertions constitute sufficient allegations by UCC that the Shell/Montell defendants and SOC operated as a single economic entity, and preclude a dismissal of this claim. See In re Buckhead America Corp., 178 Bankr. 956, 975 (D. Del. 1994) ("the nature and extent of the dominion and control exercised by [defendants] over [their subsidiary] is a question of fact, not subject to resolution on a motion to dismiss) (internal quotation omitted); Geyer, 621 A.2d at 793 (denying motion to dismiss where "three examples [of alleged domination] provided sufficiently specific factual allegations to support plaintiff's" alter ego claim); Mabon, Nugent & Co. v. Texas Am. Energy Corp., 1990 Del. Ch. LEXIS 46, Civ. A. No. 8578, 1990 WL 44267, at *5 (Del. Ch. Apr. 12, 1990) (issues of material fact with respect to plaintiffs' veil-piercing theory precluded summary judgment on claim that subsidiary was instrumentality of its parent).
Similarly, UCC also sufficiently alleges an overall element of unfairness and injustice. Before entering into the CUA, UCC was assured by SOC executives that SOC "operated independently from RDS." Cplt. P 131. Under the CUA, UCC and SOC agreed to use "their best reasonable efforts" to carry out the Cooperative Undertaking." See Cplt. P 62; CUA Articles 1.12(c)(iii), 2.01, 2.03. UCC shared "confidential and proprietary information and know-how" with SOC in order to further the UCC/Shell Venture, based on these assurances that SOC would act in its own economic interests. See Cplt. P 278, 323. It would be unfair to allow the Shell/Montell defendants to use their subsidiary to shield themselves from liability, where they have heretofore ignored that subsidiary's "separate structure and . . . individual economic interests." UCC Opp. Mem. (Shell/Montell) at 22; see also United States v. Golden Acres, Inc., 702 F. Supp. 1097, 1106 (D. Del. 1988), aff'd, 879 F.2d 860 (3d Cir. 1989). Therefore, the motion to dismiss the claim for breach of the CUA by the Shell/Montell defendants is denied.
IX. Count XVII: Equitable Estoppel Against All RDS Defendants
UCC alleges that it relied to its detriment on representations by the RDS defendants
to the effect that [SOC] was and would be operated and managed as a wholly independent and separate company vis-a-vis the rest of the RDS Group, that [SOC's] activities would be conducted in its own best interests, and that [SOC] would contract with one or more other members of the RDS Group only on terms that would be fair to [SOC].
Cplt. P 323. UCC now alleges that these representations were either false or misleading. Id. In its claim, UCC seeks to estop SOC from "relying on any contractual language for any other behavior on the part of UCC induced by the RDS Group's avowals of [SOC's] operational independence vis-a-vis the rest of the RDS Group with respect to the subject matter of the UCC/Shell Venture and related matters . . . ." Id. P 324. The Shell/Montell defendants have moved to dismiss this claim.
Despite Defendants' argument to the contrary, estoppel may be pled as an affirmative cause of action.
Accordingly, UCC's claim will not be dismissed on the ground that estoppel is only available to bar a defendant from raising a defense. Defendants also invoke the parol evidence rule in support of their motion to dismiss this claim. "One of the oldest and most settled principles of New York law is that a party may not offer proof of prior oral statements to alter or refute the clear meaning of unambiguous terms of written, integrated contracts to which assent has voluntarily been given." Azuma N.V. v. Sinks, 646 F. Supp. 122, 127 (S.D.N.Y. 1986) (citations omitted). Defendants have identified no terms of the CUA which they contend conflict with the representations attributed to Defendants by UCC. Therefore, this is not a basis for dismissing UCC's claim for equitable estoppel.
If Defendants later seek dismissal of this claim upon a motion for summary judgment, I am confident that they will advise the Court of specific provisions of the CUA with which the oral representations allegedly conflict.
X. Count III: Violations of Section 1 of the Sherman Act in the Polypropylene Resin and Impact Co-Polymer Markets by All Defendants Except Montell N.V., Montell Polyolefins, Technipol and SPC
In Count III, UCC alleges that SOC's "actions in suspending and then terminating the proposed Project Nautilus venture with UCC in 1991" constituted "part of a collusive scheme . . . taken in furtherance of Montedison's and RDS' efforts to form an unlawful joint venture" which unreasonably restrains trade and commerce in two specific markets
in violation of Section 1 of the Sherman Act.
Cplt. P 235. Defendants argue that this claim must be dismissed (1) because antitrust law imposes no substantive duty on producers to expand markets, and (2) because UCC suffered no damages, in that it does not assert that Defendants prevented UCC from expanding on its own.
A. Sufficiency of Claim of Anticompetitive Conduct
In order to state a claim under Section 1 of the Sherman Act, a plaintiff must allege concerted action by two or more persons which unreasonably restrains interstate or foreign trade or commerce. Telectronics Proprietary, Ltd. v. Medtronic, Inc., 687 F. Supp. 832, 837 (S.D.N.Y. 1988) (citing Oreck Corp. v. Whirlpool Corp., 639 F.2d 75, 78 (2d Cir. 1980), cert. denied, 454 U.S. 1083, 70 L. Ed. 2d 618, 102 S. Ct. 639 (1981)). Plaintiff has met this requirement. In Count III, UCC alleges that
beginning in 1991, Montedison and RDS conspired with SOC to terminate the planned "project Nautilus" expansion (and a 1994 UCC proposal to build a 200,000 ton UCC/SOC [polypropylene] plant) and to deter Shell Canada from investing in a new UNIPOL plant with the purpose and effect of restricting [polypropylene] resin output, reducing competition, and thereby raising prices, and that this conspiracy unreasonably restrained trade in the [polypropylene] Resin and Impact Co-Polymer Markets in North America in violation of Section 1 of the Sherman Act.
UCC Opp. Mem. (Shell/Montell) at 6 (citing Cplt. PP 105-17, 196-212, 234-37). UCC has properly pled facts which, if proven, would entitle it to relief. See, e.g., Associated Press v. United States, 326 U.S. 1, 15, 89 L. Ed. 2013, 65 S. Ct. 1416 (1945); K.M.B. Warehouse Distribs., Inc. v. Walker Mfg. Co., 61 F.3d 123, 129 (2d Cir. 1995) (adverse effect on competition as a whole in the relevant market includes reduced output); Consolidated Gold Fields PLC v. Minorco, S.A., 871 F.2d 252, 257-58 (2d Cir.), cert. dismissed, 492 U.S. 939, 110 S. Ct. 29, 106 L. Ed. 2d 639 (1989) (acquisition posed clear threat of decreased competition where plaintiffs alleged that it would result in higher prices and reduced output).
Defendants maintain that SOC's decision not to proceed with Project Nautilus does not constitute anticompetitive conduct because a firm has no general duty to help its competitors. Shell/Montell Mem. at 3-4. Defendants base this argument, however, on standards applicable to claims of unilateral action under Section 2 of the Sherman Act rather than on standards applicable to concerted action under Section 1. Antitrust law makes a clear distinction between unilateral and concerted conduct. See Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 767-69, 81 L. Ed. 2d 628, 104 S. Ct. 2731 (1984); Seagood Trading Corp. v. Jerrico, Inc., 924 F.2d 1555, 1567-68 (11th Cir. 1991). Where a concerted refusal to deal with a competitor has injured competition by restricting output, courts have regularly found such conduct illegal. See, e.g., FTC v. Superior Court Trial Lawyers Ass'n, 493 U.S. 411, 424-25, 107 L. Ed. 2d 851, 110 S. Ct. 768 (1990); NCAA v. Board of Regents, 468 U.S. 85, 106-107, 82 L. Ed. 2d 70, 104 S. Ct. 2948 (1984); United States v. General Motors Corp., 384 U.S. 127, 139-41, 16 L. Ed. 2d 415, 86 S. Ct. 1321 (1966). Finally, Defendants argue that "declining to invest hundreds of millions of dollars to build new manufacturing facilities . . . does not amount to 'restricting output.'" Shell/Montell Mem. at 3. This argument at best raises a question of fact not properly addressed on a motion to dismiss. If, for example, as UCC alleges, Defendants conspired to prevent a new UNIPOL polypropylene resin plan from starting up, such conduct would violate Section 1 of the Sherman Act.
B. Does UCC Allege That it Was Prevented from Expanding on its Own?
Defendants also urge dismissal of UCC's claim because they maintain that UCC "fails to allege facts that indicate that it was prevented from expanding on its own." Shell/Montell Mem. at 2 (emphasis in original). Defendants are incorrect. UCC has made several factual allegations that Defendants' actions "prevented it from making the capacity expansions contemplated by Project Nautilus." UCC Opp. Mem. (Shell/Montell) at 10. For example, UCC alleges that it "had no practical alternative for constructing a polypropylene plant when [SOC] declined to proceed jointly;" that SOC knew "it would have been impossible for UCC to get an adequate catalyst partner to replace" SOC; and that "Defendants' actions . . . prevented new capacity . . . from coming on the [North American Polypropylene] market." See Cplt PP 122, 146, 205, 236. Defendants' disputes with these factual allegations, such as its own factual assertions that UCC "could have expanded on its own" and "was actually in a more advantageous position [to expand] than third-party licensees" (see Shell/Montell Mem. at 5 n.6, 6 n.8) are irrelevant on a motion to dismiss.
UCC has alleged facts that, if proven, would sufficiently establish that Defendants prevented UCC from making capacity expansions on its own or with a third party, and that Defendants caused "substantial and direct injury to overall competition in the relevant markets." UCC Opp. Mem. (Shell/Montell) at 10. See Dillard v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 961 F.2d 1148, 1159 (5th Cir. 1992) (reversing lower court's dismissal of antitrust claims because plaintiff did not need "to show how he was damaged at this point" and because allegations "that his business and property were injured . . . [were] sufficient to satisfy the requirements of notice pleading"), cert. denied, 506 U.S. 1079, 113 S. Ct. 1046, 122 L. Ed. 2d 355 (1993).
XI. Count VI: Violations of Section 7 of the Clayton Act in the Total Package License and Catalyst Markets by RDS, Shell Transport, Montedison, Shell N.V., Montell N.V., and Montell
In Count VI, UCC alleges that the effect of the formation of the Montell venture "may be substantially to lessen competition or tend to create a monopoly in violation of Section 7 of the Clayton Act (15 U.S.C. § 18)
in at least two" specific markets. Defendants challenge UCC's standing to assert this claim. In order to have standing to sue under Section 7 of the Clayton Act, a private plaintiff must allege antitrust injury, "which is to say injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 50 L. Ed. 2d 701, 97 S. Ct. 690 (1977). Defendants argue that UCC lacks standing to challenge Montell's formation because "as a competitor in the alleged licensing markets, . . . UCC would benefit" from any lessening of competition caused by the Montell transaction and thus "cannot have suffered" antitrust injury. Shell/Montell Mem. at 8. Alternatively, Defendants argue that there is no antitrust injury because any losses suffered as a result of the formation of Montell "would be the result of increased competition." Id. at 9.
"The antitrust laws . . . were enacted for 'the protection of competition, not competitors.'" Brunswick, 429 U.S. at 488 (quoting Brown Shoe Co. v. United States, 370 U.S. 294, 320, 8 L. Ed. 2d 510, 82 S. Ct. 1502 (1962) (emphasis in original)). Therefore UCC must allege that competition in general has suffered, not just that UCC itself has been harmed. Plaintiff's Complaint alleges the requisite harm. UCC alleges that "the Montell venture . . . has and will substantially lessen competition" in the relevant markets (Cplt. PP 256-57); that as a result of Defendants' actions, "competition in the already concentrated Total Package License Market . . . has been and will continue to be unreasonably restrained" (id. P 241); and that competition in the Catalyst Market has suffered (id. PP 192, 242). UCC also alleges numerous overt acts by Defendants in furtherance of a "collusive scheme" to "lessen competition . . . in the Total Package License Market" by "reducing the only significant competition for Spheripol" in that market. Id. P 179. In addition, UCC charges that Defendants' goals were to "restrict output, increase prices, limit the introduction of advanced technology, realize supracompetitive profits, and . . . harm competition." Id.
Notwithstanding these allegations, Defendants argue that as a competitor, UCC stands to benefit from any lessening of competition and therefore lacks standing to challenge the formation of Montell. In Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 116-17, 93 L. Ed. 2d 427, 107 S. Ct. 484 (1986), the Supreme Court held that "competition for increased market share is not activity forbidden by the antitrust laws," and that the antitrust laws do not protect competitors from loss of profits due to price competition. Defendants correctly note that the Cargill decision "imposed significant barriers to competitor attempts" to challenge merger transactions, and "did not leave competitor plaintiffs a very good chance of having standing to enjoin mergers." Community Publishers, Inc. v. Donrey Corp., 892 F. Supp. 1146, 1166 (W.D. Ark. 1995) (citing Phototron Corp. v. Eastman Kodak Co., 842 F.2d 95, 102 (5th Cir.), cert. denied, 486 U.S. 1023, 100 L. Ed. 2d 228, 108 S. Ct. 1996 (1988)). However, Cargill "has not rendered such attempts [by a competitor to enjoin mergers] impossible." R.C. Bigelow, Inc. v. Unilever N.V., 867 F.2d 102, 110 (2d Cir.), cert. denied, 493 U.S. 815, 110 S. Ct. 64, 107 L. Ed. 2d 31 (1989). A competitor plaintiff has standing as long as it can demonstrate "that its injury was caused by anticompetitive or predatory aspects of [defendant's] conduct, not by competition." Pacific Express, Inc. v. United Airlines, Inc., 959 F.2d 814, 818 (9th Cir.), cert. denied, 506 U.S. 1034, 121 L. Ed. 2d 686, 113 S. Ct. 814 (1992).
Assuming, as I must, the truth of Plaintiff's allegations, UCC has adequately alleged injury caused by the anticompetitive nature of Defendants' actions. Despite Defendants' attempts to distinguish the cases cited by UCC, those cases are similar enough to the instant case to support a finding that UCC has standing to challenge the formation of Montell. See, e.g., Consolidated Gold Fields, PLC v. Minorco, S.A., 871 F.2d 252 (2d Cir.), cert. dismissed, 492 U.S. 939, 110 S. Ct. 29, 106 L. Ed. 2d 639 (1989) (finding standing where target of an acquisition would lose independence because of injury occurring in the market; relied on in holding that a competitor-plaintiff has standing to challenge a merger in a market into which the plaintiff sought to expand (see Bon-Ton Stores, Inc. v. May Dep't Stores Co., 881 F. Supp. 860, 878 (W.D.N.Y. 1994))); Cia. Petrolera Caribe, Inc. v. Arco Caribbean, Inc., 754 F.2d 404, 408 (1st Cir. 1985) (competitor gas station owner had standing to sue based on "its allegations that the refined gasoline market has been harmed by [the merger] and that it will likely be 'squeezed' out of the market in the foreseeable future"); Community Publishers, 892 F. Supp. at 1165-66 (owners of competing newspaper had standing to challenge merger of two local newspapers because "any monopolistic increase in the combination's advertising rates would soak up all the available advertising revenue" and thereby "harm not only readers and advertisers, but also competitors"); Christian Schmidt Brewing Co. v. G. Heileman Brewing Co., 600 F. Supp. 1326, 1331 n.5 (E.D. Mich.), aff'd, 753 F.2d 1354 (6th Cir.), cert. dismissed, 469 U.S. 1200, 105 S. Ct. 1155, 84 L. Ed. 2d 309 (1985) (plaintiff had standing where it showed "a substantial probability that if the proposed merger is accomplished and competition between [the merging defendants] is eliminated, then the combined firm would be able to target its competitive efforts on [plaintiff] and other small brewers. As a result of this merger, plaintiffs' ability to wholesale and distribute their products may be impaired, and ultimately, [plaintiff's] ability to survive in this industry of giants may be in question. This is exactly the sort of injury the antitrust laws were intended to prevent.") (citing United States v. Topco Assocs., Inc., 405 U.S. 596, 610, 92 S. Ct. 1126, 31 L. Ed. 2d 515 (1972)). See also Hammes v. AAMCO Transmissions, Inc., 33 F.3d 774, 783 (7th Cir. 1994) (given two plausible interpretations of an antitrust claim, court chose one that afforded standing to the plaintiff and denied motion to dismiss for lack of standing because it was "premature" to draw conclusions regarding "the character of the loss that [plaintiff] seeks to recover").
The above-cited authorities provide ample support for finding that UCC has standing to challenge the formation of Montell. UCC has adequately alleged that competition has suffered as a result of the transaction, and that any harm suffered by UCC is the result of the anticompetitive nature of Defendants' actions. The motion to dismiss this count is denied.
For the foregoing reasons, Defendants' motions to dismiss UCC's Third Amended Complaint are granted in part and denied in part. UCC's claim for breach of the implied duty of good faith and fair dealing (Count XIII) is dismissed. In addition, those portions of the claim for tortious interference with prospective contractual relations (Count VIII) which relate to prospective contractual relations with potential licensees of the UNIPOL/SHAC technology, prospective contractual relations with Shell Canada, and expansion of the UCC/Shell Venture through Project Nautilus are dismissed. All other claims survive.
Although UCC has now amended its complaint three times, this is the first time that Defendants have moved to dismiss any of UCC's claims, and thus the first time that the Court has expressed its view on the sufficiency of the Complaint. Plaintiff may therefore have one opportunity to replead its claim for tortious interference with prospective contractual relations as it relates to prospective contractual relations with potential licensees of the UNIPOL/SHAC technology and prospective contractual relations with Shell Canada.
Shira A. Scheindlin
Dated: New York, New York
August 30, 1996