Saudi Basic Industries Corp. v. Exxon Corp.

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
3-24-2004
Saudi Basic Ind v. Exxon Corp
Precedential or Non-Precedential: Precedential
Docket No. 03-2201
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PRECEDENTIAL Gregory A. Castanias, Esq. (Argued)
William K. Shirey II, Esq.
UNITED STATES Jones Day
COURT OF APPEALS 51 Louisiana Avenue, N.W.
FOR THE THIRD CIRCUIT Washington, D.C. 20001
Kenneth R. Adamo, Esq.
No. 03-2201 Michael W. Vary, Esq.
Leozino Agozzino, Esq.
Jones Day
SAUDI BASIC INDUSTRIES North Point
CORPORATION, 901 Lakeside Avenue
individually, And In The Name of, Cleveland, OH 44114
And On Behalf Of;
AL-JUBAIL PETROCHEMICAL Attorneys for Appellant
COMPANY, A Partnership
Elizabeth J. Sher, Esq.
Appellant Pitney, Hardin, Kipp & Szuch
P.O. Box 1945
v. Morristown, NJ 07962
EXXON CORPORATION; James W. Quinn, Esq. (Argued)
EXXON MOBIL CORPORATION David J. Lender, Esq.
Weil, Gotshal & Manges
767 Fifth Avenue, 27 th Floor
New York, NY 10153
On Appeal from the
United States District Court Andrew S. Pollis, Esq.
for the District of New Jersey David J. Michalski, Esq.
D.C. Civil Action No. 98-cv-04897 Hahn, Loeser & Parks
(Honorable William H. Walls) 3300 BP America Building
200 Public Square
Cleveland, OH 44114
Argued December 9, 2003
K.C. Johnson, Esq.
Exxon Mobil Corporation
Before: AMBRO, FUENTES and 800 Bell Street, Suite 1686J
CHERTOFF, Circuit Judges Houston, TX 77002
(Filed March 24, 2004) Attorneys for Appellees
level of liquid in the fluidizing medium
entering the reactor which is in the range
OPINION OF THE COURT of from 17.4 to 50 weight percent based on
the total weight of the fluidizing medium”
(or in the party’s shorthand, operating
reactors “above 17.4 weight percent
AM BRO, Circuit Judge
condensed”). 1
For over five years plaintiff-
In 1998, SABIC filed a declaratory
a p p ellant Saudi Basic Indu stries
judgment action in the United States
Corporation (“SABIC”) and defendant-
District Court for the District of New
appellee E xxonM obil C orpo ration
Jersey on behalf of its (and ExxonM obil’s)
(“ExxonMobil”) have been litigating the
partially-owned subsidiary, Kemya,2
ownership rights to supercondensed mode
alleging that ExxonM obil used technology
technology (“SCM-T”), a process for
developed for Kemya to obtain the patents
manufacturing polyethylene patented by
in breach of its service agreement with
ExxonM obil. On June 5, 2002, the United
Kemya. SABIC sought a declaratory
States District Court for the District of
judgment that Kemya owns the patents and
New Jersey issued an interlocutory order
an injunction directing ExxonMobil to turn
(the “June 2002 Order”) enforcing a
over legal title to Kemya.
private stipulation agreement between
SABIC and ExxonMobil under which E x x o n M obil filed several
SABIC agreed that its affiliates would not counterclaims, and sought, inter alia, a
practice the SCM-T process. On appeal, declaratory judgment of its ownership
SABIC has requested that we vacate the rights in the ’749 patent. The fourth of
June 2002 Order. Because the District these counterclaims, filed derivatively on
Court did not require ExxonMobil to Kemya’s behalf, accused SABIC of
satisfy the requisites for the injunctive
relief it requested, we vacate that order and 1
remand to the District Court. The second element of the ’749 patent
is the maintenance of a specific ratio of
I. fluidized bulk density to settled bulk
Facts and Procedural Posture density (“FBD/SBD ratio”). The second
element of the ’304 patent is the
In 1994 and 1995, the United States maintenance of a certain bulk density
Patent and Trademark Office issued two function (called the “Z function”).
patents—No. 5,352,749 and No. 5,436,304
2
(called, for simplicity, the ’749 patent and Formed in 1980 as a joint venture
the ’304 patent)—to Exxon Corporation between SABIC and Exxon Chemical
(now ExxonMobil) for SCM-T. Each Arabia, Inc. (then a subsidiary of Exxon
patent has two elements, and the first Corporation), Kemya is now a wholly-
element of each patent is the same: “a owned subsidiary of ExxonMobil.
2
breaching its fiduciary duty to Kemya by SHARQ had received permission to
encouraging SABIC affiliates (including perform them as the third-party beneficiary
one called SHARQ) to practice the SCM -T of agreements between ExxonMobil and
p r o c e ss ( t h e “ F o u r t h A m e n d e d another party.
Counterclaim”).
While SABIC’s Motion to Clarify
In February 2000, SABIC moved to was pending, ExxonMobil filed a motion
dismiss the Fourth Amended to dismiss SABIC’s claims (the “Motion to
Counterclaim. ExxonMobil agreed to the Dismiss”), alleging that SABIC violated
dismissal in exchange for SABIC’s the April 2000 Order by allowing SHARQ
promise that its affiliates would not to practice SCM-T. SABIC opposed the
practice the SCM-T process while the Motion to Dismiss by urging the District
litigation was pending. On March 10, Court to confirm its interpretation of the
2000, the parties entered into a stipulation March 2000 Stipulation: that a SABIC
that “neither SABIC, SHARQ . . . nor any affiliate did not practice SCM-T by
other SABIC affiliate (other than Kemya) operating above 17.4 weight percent
will use or practice SCM-T Information3 condensed if it was not also practicing the
until the ownership rights thereto are second element of either patent (either by
established and the owner expressly maintaining a specific FBD/SBD ratio or a
authorizes such use . . . .” (the “March specific Z function).
2000 Stipulation”).
In addition to opp osin g
The parties tendered the March ExxonMobil’s Motion to Dismiss, SABIC
2000 Stipulation to the District Court on cross-moved under Federal Rule of Civil
March 13, 2000. The District Court wrote Procedure 60 to vacate the Court’s “so
“so ordered” on the March 10 Stipulation ordered” notation on the March 2000
and later entered it as a court order on Stipulation, in order to convert the April
April 3, 2000 (the “April 2000 Order”). 2000 Order into a private agreement (the
“Motion to Vacate”). SABIC argued that
In the summer of 2000, SABIC’s
the District Court entered the March 2000
affiliate, SHAR Q, began operating
Stipulation as a court order mistakenly and
reactors above 17.4 weight percent
contrary to the parties’ intent. The District
condensed. Upon learning of this, SABIC
Court agreed and granted SABIC’s Motion
moved the District Court to clarify the
to Vacate in April 2001. Saudi Basic
March 2000 Stipulation (the “M otion to
Indus. Corp. v. ExxonMobil Corp., No. 98-
Clarify”) by confirming that it did not
4897 (D.N.J. Apr. 26, 2001) (vacating the
prohibit SHARQ’s operations because
“so ordered” notation that was appended to
the March 2000 Stipulation as entered
3 “inadvertently and without the parties’
SCM-T Information was defined in the
express agreement”). But at the same
Stipulation as the processes described in
hearing, the District Court also noted
the ’749 and ’304 patents.
3
SABIC’s representation that it was not SABIC appealed the June 2002
contesting the Court’s right to continue to Order pursuant to 28 U.S.C. § 1292(a)(1).
enforce the March 2000 Stipulation. JA at ExxonMobil moved for partial dismissal of
437–38 (Apr. 26, 2001 hearing transcript). the appeal “for want of appellate
jurisdiction, or in the alternative, for
A year later, on April 3, 2002, the
partial summary affirmance.” That motion
District Court denied SABIC’s Motion to
was referred to a merits panel and is
Clarify after finding no legal justification
consolidated with SABIC’s appeal of the
(such as mutual mistake) to clarify or
June 2002 Order.
reform the March 2000 Stipulation. Saudi
Basic Indus. Corp. v. ExxonMobil Corp., II.
194 F. Supp. 2d 378, 389–90 (D.N.J.
Jurisdiction
2002). The District Court further stated
that SABIC had been violating the March As threshold matters, ExxonMobil
2000 Stipulation since August 1, 2000, by challenges our appellate jurisdiction and
allowing SHARQ to operate its reactors the timeliness of SABIC’s appeal. We
above 17.4 weight percent condensed. Id. conclude that our appellate jurisdiction is
at 390. The District Court did not address proper under 28 U.S.C. § 1292(a)(1)
S A B IC’s arg um ent, advanced in because the June 2002 Order is effectively
opposition to ExxonMobil’s Motion to an injunction. And we conclude that
Dismiss, that to practice the SCM-T SABIC’s appeal was timely because it was
process a reactor has to employ both filed within the 30-day appellate window
elements of either patent, not just operate that began with the issuance of the June
above 17.4 weight percent condensed. 2002 Order.
A. We have appellate jurisdiction
SABIC moved for reconsideration under 28 U.S.C. § 1292(a)(1).
of this decision, while ExxonMobil,
As the June 2002 Order is an
seizing on the District Court’s statement
interlocutory decision of the District Court,
that SABIC had violated the March 2000
its appealability is governed by 28 U.S.C.
Stipulation, moved for the District Court to
§ 1292. Section 1292(a)(1) provides
enforce that Stipulation. On June 5, 2002,
appellate jurisdiction over interlocutory
the District Court denied SABIC’s motion
orders “granting, continuing, modifying,
f o r r e c o nsideration and gr a nte d
refusing or dissolving injunctions, or
ExxonMobil’s motion to enforce the
r e f using to dissolv e or m odif y
March 2000 Stipulation. This action—the
injunctions.” Thus, our appellate
June 2002 Order— did not address
jurisdiction is proper under § 1292(a)(1) if
SABIC’s argument that only by practicing
the June 2002 Order is an injunction.
both elements of one of the patents would
its affiliate be violating the March 2000 An order need not have the “literal
Stipulation’s terms. characterization” of an injunction for
4
§ 1292(a)(1) to apply, as long as it has the Order imposes an equitable remedy against
same practical effect. Hershey Foods SA BIC , whose noncompliance is
Corp. v. Hershey Creamery Co., 945 F.2d punishable by contempt. See Cohen, 867
1272, 1276 (3d Cir. 1991). We have F.2d at 1465; see also Harley-Davidson,
previously defined an injunctive order as Inc. v. Morris, 19 F.3d 142, 146 (3d Cir.
one that is “[1] directed to a party, [2] 1994) (“Failure to obey a court judgment
enforceable by contempt, and [3] designed is an indirect contempt . . . .” (citing
to accord or protect ‘some or all of the Black’s Law Dictionary 319 (6th ed.
substantive relief sought by a complaint’ in 1990))). Third, the June 2002 Order was
more than a temporary fashion.” Cohen v. “designed to accord or protect some or all
Bd. of Trs. of the Univ. of Med. & of the substantive relief sought by a
Dentistry of N.J., 867 F.2d 1455, 1465 n.9 complaint.” In its amended counterclaims,
(3d Cir. 1989) (en banc) (quoting W right ExxonM obil sought substantive relief that
& Miller, et al., Federal Practice and included a declaration of ownership of the
Procedure § 3922 (1977)); see also ’749 patent, one of the patents for the
Hershey Foods, 945 F.2d at 1277 (“[I]n SCM-T process. The June 2002 Order
order to be an injunction for purposes of § enforced the parties’ stipulated agreement
1292(a)(1), the order must grant part of the that neither SABIC nor its affiliates would
relief requested by the claimant and must practice the SCM-T process, as defined by
b e i m m e d i a t el y e n f o r c ea b l e b y the ’749 and ’304 patents, until ownership
contempt.”). In contrast, “[o]rders that in rights to them are established. In this
no way touch on the merits of the claim context, the June 2002 Order was
but only relate to pretrial procedures” are “designed to accord or protect some or all
not interlocutory injunctions within the of the substantive relief sought” by
meaning of § 1292(a)(1). Hershey Foods, ExxonMobil in its amended counterclaims,
945 F.2d at 1277 (citing Switzerland namely, the right, as its purported owner,
Cheese Ass’n v. E. Horne’s Market, Inc., to exclude SABIC and its affiliates from
385 U.S. 23 (1966)). ownership or practice of the ’749 patent. 4
Thus the June 2002 Order is, in effect, an
We conclude that the June 2002
injunction appealable under 28 U.S.C. §
Order satisfies the three Cohen factors for
1292(a)(1).
an effective injunction appealable under
28 U.S.C. § 1292(a)(1). First, because the
June 2002 Order requires that “SABIC
4
shall fully comply with the terms of the We reject as groundless ExxonMobil’s
March [2000] Stipulation, which are argument that only the relief sought in the
incorporated herein by reference,” it is Fourth Amended Counterclaim (which was
expressly directed to a party. Second, by dismissed), as opposed to the amended
granting ExxonMobil’s motion to enforce counterclaims as a whole, could have been
the March 2000 Stipulation, the June 2002 the substantive relief protected by the June
2002 Order.
5
Finally, we reject ExxonM obil’s B. SABIC’s appeal was timely.
argument that SABIC must demonstrate
Under Federal Rule of Appellate
“serious, perhaps irr eparable
Procedure 4(a)(1)(a), a party has 30 days
consequences” from the June 2002 Order
after an order is entered in which to file an
in order to sustain an appeal. ExxonM obil
appeal. SABIC filed its Notice of Appeal
points to Carson v. American Brands, Inc.,
on June 21, 2002, within the same month
450 U.S. 79 (1981), in which the Supreme
that the District Court entered the June
Court stated that “[u]nless a litigant can
2002 Order. But ExxonMobil construes
show that an interlocutory order of the
the June 2002 Order as a reinstatement of
district court might have a ‘serious,
the previously-vacated order enforcing the
perhaps irreparable, consequence,’ and
March 2000 Stipulation,5 and argues that
that the order can be ‘effectually
the reinstatement of a previously vacated
challenged’ only by immediate appeal, the
order cannot revive an expired appeal
general congressional policy against
period. Thus, ExxonMobil suggests,
p i e ce m e a l r e v i e w w i l l p r e c l u de
SABIC’s 30-day period in which to appeal
interlocutory appeal.” Id. at 84 (citing
the enforcement of the March 2000
Baltimore Contractors, Inc. v. Bodinger,
Stipulation began to run on April 3, 2000,
348 U.S. 176, 181 (1955)). But we have
the day the District Court entered the
since recognized that Carson required the
March 2000 Stipulation as an order. We
showing of a “serious, perhaps irreparable
do not agree.
consequence” in the context o f
determining the appealability of an order ExxonM obil relies on tw o
denying injunctive relief. Cohen, 867 F.2d cases—West v. Keve, 721 F.2d 91 (3d Cir.
at 1467. We have consistently refused to 1983), and Hall v. Commonwealth Mental
require such a showing of an enjoined Health Center, 772 F.2d 42 (3d Cir.
party appealing an order granting an 1985)—in support of its argument that the
injunction. See Casey v. Planned reinstatement of a previously vacated order
Parenthood of S.E. Pa., 14 F.3d 848, 855 cannot revive an expired appellate period.
(3d Cir. 1994) (“Unlike a denial, a grant of Both cases miss the mark here. In West
injunctive relief subjects the losing party to and Hall we rejected as untimely appeals
contempt, and provides some or all of the from reinstated, previously vacated orders.
relief sought by the claimant, two of the But in both of those cases, unlike here, a
key features we identified in Cohen as
justifying an interlocutory appeal.”); Ross
v. Zavarella, 916 F.2d 898, 902 (3d Cir. 5
Recall that the District Court entered
1990); Cohen, 867 F.2d at 1467. Thus,
the Stipulation as an order on April 3,
because the June 2002 Order granted
2000, but vacated the “so ordered”
injunctive relief, SABIC need not show
notation a year later. Saudi Basic Indus.
“serious, perhaps irreparable consequence”
Corp. v. ExxonMobil Corp., No. 98-4897
to sustain its appeal.
(D.N.J. Apr. 26, 2001) (order).
6
party sought reinstatement of an earlier and did so simultaneously. This case
judgment for the express purpose of presents circumstances not present in West
reviving an appellate window. In West, and Hall, and therefore is not controlled by
our holding rejecting the timeliness of their holdings.
such an appeal was expressly limited to
In summary, we reject
that circumstance:
ExxonMobil’s argument that SABIC’s
We hold, therefore, that appeal period began on April 3, 2000, the
because the avowed purpose day the District Court entered the March
of the Rule 60(b) motion in 2000 Stipulation as a court order. SABIC
this case was to extend the may appeal from the June 2002 Order
time for appeal, it had to enforcing a previously vacated stipulation
meet the time limitations of order. That appeal, filed within 30 days of
Rule 4(a). We expressly do the June 2002 Order, is timely.
not decide whether a Rule
III.
60(b) motion must meet the
time constraints of Rule 4(a) Application of the Injunction Standard
under other circumstances
The District Court’s June 2002
not present here.
Order required SABIC to “fully comply
721 F.2d at 97. Similarly, in Hall, we with the terms of the March [2000]
affirmed the district court’s denial of an Stipulation.” On appeal, SABIC argues
order to vacate and reenter an earlier that the District Court erred in rendering
judgment which a party sought “in order to this order without requiring ExxonMobil
permit timely appeal on the merits.” 772 to satisfy the required elements for
F.2d at 42. granting an injunction.6
In our case the record clearly In the context of the appellate
indicates that the purpose for vacating the jurisdiction question discussed above, we
“so ordered” notation was not to revive
SABIC’s appeal rights but rather to allow
6
SABIC to avoid contempt. Nor could the To satisfy the injunction standard, the
sequence of vacate-then-reinstate possibly moving party must demonstrate the classic
have been engineered by SABIC to revive four elements: (1) a reasonable probability
its appellate window, as it was of success on the merits; (2) that denial of
ExxonM obil, not SABIC, who moved to injunctive relief will result in irreparable
enforce the previously vacated stipulation injury; (3) that granting injunctive relief
order—and did so more than a year after will not result in even greater harm to the
the order to vacate was entered. In West nonmoving party; and (4) that granting
and Hall, the same party who moved to injunctive relief will be in the public
vacate the order also moved to reinstate it, interest. Allegheny Energy, Inc. v. DQE,
Inc., 171 F.3d 153, 158 (3d Cir. 1999).
7
determined that the June 2002 Order was, the second elements of either patent in
in effect, an injunction. The fact that it addition to operating above 17.4 weight
enforced a contractual settlement did not percent condensed. “Where material facts
render it any less of an injunction, as we concerning the existence or terms of an
have recognized that “[a] district court agreement to settle are in dispute, the
may enter injunctive relief on a party’s parties must be allowed an evidentiary
behalf to enforce a settlement agreement hearing.” See Tiernan v. Devoe, 923 F.2d
when it determines that one of the parties 1024, 1031 (3d Cir. 1991) (citing Callie v.
has failed to perform its obligations.” Near, 829 F.2d 888, 890 (9th Cir. 1987)
Wilcher v. City of Wilmington, 139 F.3d (emphasis in original)); see also Hensley v.
366, 372 (3d Cir. 1998). Alcon Labs., Inc., 277 F.3d 535, 541 (4th
Cir. 2002) (“If there is a factual dispute
We review a district court’s grant of
over the existence of an agreement, over
a preliminary injunction for “whether the
the authority of attorneys to enter into an
court abused its discretion, committed an
agreement, or over the agreement’s terms,
obvious error in applying the law, or made
the district court may not enforce a
a clear mistake in considering the proof.”
settlement agre em en t su m m ar ily.”
Am. Civil Liberties Union v. Ashcroft, 322
(emphasis omitted)). Thus the District
F.3d 240, 250 (3d Cir. 2003) (citing In re
Court should have a hearing to resolve the
Assets of Martin, 1 F.3d 1351, 1357 (3d
disputed terms of the March 2000
Cir.1993)), cert. granted, 124 S. Ct. 399Stipulation prior to enforcing it.
(2003). Because the June 2002 Order was
effectively an injunction, it was a “clear IV.
mistake” for the District Court not to have
Conclusion
required ExxonMobil, the moving party, to
prove the requisites for granting an We have jurisdiction over SABIC’s
injunction. We thus remand to the District appeal, which was timely. Because the
Court for this consideration. See Rolo v. District Court did not properly apply the
Gen. Dev. Corp., 949 F.2d 695, 704 (3d i n j u n ct i o n s t a n d a rd i n g rantin g
Cir. 1991). ExxonMobil’s motion to enforce the
March 2000 Stipulation, we hereby vacate
We also agree with SABIC that the
its June 2002 Order and remand to the
District Court should hold a hearing prior
District Court for a hearing to resolve the
to enforcing the March 2000 Stipulation.
March 2000 Stipulation’s disputed terms
In requiring SABIC to comply with the
before determining whether injunctive
March 2000 Stipulation, the June 2002
relief should issue under the standards
Order incorporated its terms. But the
long extant for so determining.
parties dispute whether, under the terms of
the March 2000 Stipulation, “practicing
SCM -T Information,” as defined by the
’749 and ’304 patents, means practicing
8