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Stepan Co. v. Callahan Co.

July 29, 2008

STEPAN COMPANY, PLAINTIFF,
v.
CALLAHAN COMPANY, DEFENDANT.



The opinion of the court was delivered by: Irenas, Senior District Judge

HONORABLE JOSEPH E. IRENAS

OPINION

Presently before the Court are Motions for Summary Judgment filed by Plaintiff Stepan Company ("Stepan") and Defendant Callahan Company ("Callahan"). This case involves a dispute about settlement funds awarded to Callahan, a distributor of chemicals, in a federal antitrust class action for illegally inflated prices of a chemical product. Stepan, a purchaser of that chemical product from Callahan, filed this lawsuit, claiming that Callahan's retention of the settlement funds is unjust because Callahan simply passed on all overcharges to Stepan.*fn1

The central issue raised by the parties' Motions is whether federal antitrust law preempts Stepan's unjust enrichment claim. The Court finds that it does and, for the reasons stated below, will grant Callahan's Motion and deny Stepan's Motion.

I.

Stepan is a Delaware corporation with its principal place of business in Northfield, Illinois. (Pl's 56.1 Stat. ¶ 2.)*fn2

Stepan manufactures chemicals used in consumer products and industrial applications, including surfactants, which are chemicals that alter a liquid's surface tension. (Id. ¶¶ 1,6.) Sodium monochloroacetate ("SMCA") is used to make surfactants. (Id. ¶ 6.) Callahan, a New Jersey corporation with its principal place of business in Palmyra, New Jersey, is a distributor of chemical products. (Id. ¶¶ 4-5.)

Between August 1995 and September 1999 (the "Relevant Period"), Callahan sold SMCA only to Stepan. (Id. ¶¶ 7-8.) During the Relevant Period, Callahan purchased the SMCA that it resold to Stepan from Hoechst GmbH ("Hoechst") and the Clariant Company ("Clariant").*fn3 (Id. ¶ 9.) Stepan's purchases of SMCA were made pursuant to written purchase orders or telephone calls to the New Jersey offices of Callahan. (Id. ¶ 20.) The terms of Stepan's standard purchase order applied to all of its purchases, including those made over the phone. (Id.) During the Relevant Period, Callahan sold approximately 5,340,000 pounds of SMCA to Stepan at a total price of $3,953,000. (Id. ¶¶ 10-11.)

In October 2001, direct purchasers of SMCA filed a private antitrust class action in the United States District Court for the District of Columbia against several manufacturers of the chemical. (Id. ¶ 23.) Callahan's SMCA suppliers Clariant and Hoechst, as well as other manufacturers, were defendants in the action, and Callahan was a member of the plaintiff class. (Id. ¶¶ 24-25.) The plaintiff class sought treble damages to recover the inflated prices that class members paid for SMCA as a result of the defendants' alleged price fixing. (Id. ¶ 26.)

In November 2003, the class action was settled, and, pursuant to the settlement agreement, the defendants contributed to a settlement fund. (Id. ¶ 28.) Direct purchasers of SMCA that could document their purchases from the defendants could recover a pro rata portion of the settlement fund calculated according to the total volume of claims made. (Id. ¶ 29.) Callahan filed a claim seeking proceeds from the class action fund based on its purchases of SMCA from Hoechst and Clariant during the Relevant Period. (Id. ¶ 30.)

Callahan was awarded its portion of the settlement in April 2006, totaling $1,676,710.54. (Id. ¶ 32.) After paying a fee owed to a claims administrator contracted to handle its class action claim, Callahan received net proceeds of $1,123,396.06. (Id. ¶ 33.)

Stepan later learned of Callahan's settlement award. (Id. ¶ 34.) Efforts between Stepan and Callahan to resolve the present dispute concerning entitlement to the SMCA class action proceeds were unsuccessful. (Id.) Stepan then filed this action in the Northern District of Illinois on May 29, 2007, alleging unjust enrichment. (Id.) Callahan answered the complaint and moved to transfer the case to this Court. (Id.)

In October 2007, Judge John W. Darrah of the Northern District of Illinois granted Callahan's Motion to Transfer. Stepan Co. v. Callahan Chem. Co., No. 07-C-2976, 2007 WL 2908818, at *6 (N.D. Ill. Oct. 3, 2007). Judge Darrah found that New Jersey law applied to Stepan's claim because both Stepan and Callahan have places of business in New Jersey and the SMCA was located in New Jersey at the time of the commercial transactions that form the basis of Stepan's claim. Id. at *5-6.

After the case was transferred to this Court, the parties filed the present Motions for Summary ...


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