                                                                                                                           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Precedential or Non-Precedential: Precedential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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"Saudi Basic Ind v. Exxon Corp" (2004). 2004 Decisions. Paper 881.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/881


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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. 399
                                                   Stipulation 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
