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A&C Catalysts, Inc. v. Raymat Materials, Inc.

United States District Court, N.D. California

December 30, 2014

A&C CATALYSTS, INC., Plaintiff,
v.
RAYMAT MATERIALS, INC. et al., Defendant.

FINDINGS OF FACT, CONCLUSIONS OF LAW, ORDER FOR RELIEF FOLLOWING BENCH TRIAL, AND REFERRAL TO DEPARTMENT OF JUSTICE

WILLIAM ALSUP, District Judge.

INTRODUCTION

This order resolves this satellite litigation over a settlement agreement that blew up. This order includes the findings of fact and conclusions of law following a three-day bench trial.

FINDINGS OF FACT

1. N'-Lauroyl-L-lysine ("LL") is a chemical derivative of the amino acid L-lysine. LL is a powder used in the personal-care industry, including in cosmetics.

2. At all material times, Raymat Materials, Inc. was a supplier of chemical products, including LL. Dr. Jibing Lin was the president and Jim Turner was the director of sales and marketing. Dr. Lin is a chemist with a Ph.D. in organic chemistry.

3. At all material times, A&C Catalysts, Inc. was a distributor and manufacturer of chemical products. It did not, however, manufacture LL. Abraham Goldstein was the president of A&C Catalysts and John Wolfe was the director of sales and marketing at Daryalabs, Inc., which was owned by A&C Catalysts.

4. At all material times, Ajinomoto Co., Inc., located in Japan, and Raymat were the only two suppliers of LL on a commercial scale.

5. Ajinomoto previously held the rights to a LL patent, now expired. Dr. Lin (Raymat) spent six months in the lab and ten months scaling up the LL manufacturing process based, in part, on the Ajinomoto patent.

6. In 2008, A&C Catalysts refused Raymat's offer to jointly invest money in a plant in China to make LL. Raymat nevertheless went ahead and made arrangements with Yantai Justaware Pharmaceutical Co., Ltd., located in Yantai, China ("the Yantai plant") to manufacture LL. The Yantai plant became Raymat's contract (or "toll") manufacturer. Nevertheless, there was no written agreement between Raymat and the Yantai plant, only a "handshake agreement" for Yantai's manufacturing of LL for Raymat.

7. Even though Dr. Lin spent "weeks and weeks" at the Yantai plant "debugging the [LL] production problems, " Raymat had (and has) no ownership in the Yantai plant. Nor did (or does) Raymat own any of the equipment at the Yantai plant. The Yantai plant stopped producing LL in 2012. Raymat continued to sell LL from its inventory.

8. In 2013, Raymat sued A&C Catalysts regarding an exclusive supply agreement, wherein Raymat had agreed to sell LL exclusively to A&C Catalysts so long as A&C Catalysts met certain minimum purchases. Raymat Materials, Inc. v. A&C Catalysts, Inc., No. 13-567 (N.D. Cal.). A&C Catalysts filed counterclaims and a third-party complaint against Protameen Chemicals, Inc. Protameen was a distributor of chemical products, including LL. (Protameen, however, is not a party to this satellite litigation.)

9. In the original litigation, Raymat designated as "Highly Confidential - Attorney's Eyes Only" the formal name of the Yantai plant and the name of the contact person at the plant. Both names were referenced in the deposition of Dr. Lin taken by counsel for A&C Catalysts. Counsel for A&C Catalysts then filed a public declaration, dated April 13, 2014, which stated (TX 19) (internal citations omitted; emphasis added):

During the March 17, 2014 deposition of Jibing Lin of Raymat, A&C learned (1) that Raymat does not manufacture Lauroyl Lysine itself, but instead contracts with a manufacturing facility in China for all of its Lauroyl Lysine production, and has no ownership in that manufacturing facility ; (2) the name of that manufacturing facility; and (3) that Mr. Lin had a "handshake deal" with that manufacturing facility for production of Lauroyl Lysine, and had a written contract with another manufacturing facility in China for production of Lauroyl Lysine, which Raymat has not produced to A&C.

In other words, A&C Catalysts knew of the plant in China but did not know the formal name of the plant until later.

10. On May 29, 2014, the parties and their counsel appeared for a settlement conference before our Magistrate Judge Donna Ryu. At the settlement conference, key negotiations occurred party-to-party without the presence of counsel, because Attorney James Li was counsel of record for both Raymat and Protameen and possibly had a conflict. Jibing Lin and Jim Turner negotiated on behalf of Raymat, and Abraham Goldstein and John Wolfe negotiated on behalf of A&C Catalysts.

11. In pertinent part, A&C Catalysts proposed that Raymat leave the LL business with the idea that A&C Catalysts would manufacture LL in its New Jersey plant. Raymat responded that if it were to leave the LL business, A&C Catalysts should buy its "LL manufacturing process." Both sides understood this as a reference to the manufacturing process used at the Yantai plant to make the type of LL Raymat had been selling to A&C Catalysts.

12. Mr. Lin further offered to introduce Mr. Goldstein to the Yantai plant during a three-day trip to China for the price of $25, 000 plus travel expenses (although this offer was not made part of the settlement agreement and the offer was never acted upon or accepted).

13. During the settlement negotiations, "production records, " "plant records, " "batch sheets, " "quality control records, " and a "list of equipment" were never mentioned. The LL "production records" at the Yantai plant were voluminous, numbering in the thousands of pages.

14. Magistrate Judge Ryu then placed the settlement terms between A&C Catalysts and Raymat on the record, all of which is now reproduced (TX 20):

These two appearing parties have also reached a settlement agreement in this case in full resolution of the claims between the two parties. I'm going to state the material essential terms of the agreement and have the parties give their agreement on the record. Once they do, these parties are fully bound by the terms and the terms are fully enforceable. It doesn't matter whether the parties end up reducing this to writing.
So here are the material essential terms of the agreement between Raymat and ACC. The parties agree to dismiss all claims against each other in this action, with prejudice. The parties agree to a mutual release of all claims against each other, known and unknown, including a waiver of California Civil Code 1542. However, this release does not extinguish Raymat's obligation, or Raymat's counsel's obligation, to pay fees to ACC as ordered by Judge Alsup in docket number 110 in this case. The parties agree that the terms of this agreement are confidential and it can only be shared with their legal and financial advisors.
Raymat and Doctor Lin agree to leave the LL business entirely and worldwide for a period of ten years. Raymat and Doctor Lin cannot operate LL business through any subsidiary or shadow company during that time, including but not limited to, working with the Yantai plant to produce LL, or to introduce anyone to the LL business using the Yantai plant .
Raymat and Doctor Lin cannot disclose the LL manufacturing process to anyone during this ten-year period, except for ACC . If Raymat or Doctor Lin violate the ten-year ban, then ACC can sue them for breach of contract with a liquidated damage clause of $2, 000, 000. If such a breach of contract is pursued, the prevailing party shall be entitled to seek reasonable attorney's fees.
ACC agrees to purchase Raymat's remaining LL inventory, which is estimated to be 7200 kilograms, at a price of $41.80 per kilogram, which is the same price that was provided by Raymat to Protameen. This comes to a total of $300, 960, which ACC will put in an escrow account by June 6, 2014. Raymat will ship the remaining LL inventory product to ACC within one week of notification that the proceeds are in escrow. After receipt of the product ACC will have seven business days to reject any LL product due to non-conforming quality. If no rejection of product takes place during that time, the escrow funds will then be wired to Raymat, per Raymat's wire instructions.
In addition, ACC will pay $150, 000 to Raymat to purchase Raymat's LL manufacturing process, along with documentation of that process, in both English and Chinese, as well as eight hours of support time for teleconferencing with Doctor Lin . The manufacturing process will be provided to ACC by no later than August 29th, 2014 and ACC will pay Raymat the $150, 000 by no later than August 29th, 2014.
With respect to the settlement agreement, if either party pursues an action to enforce the settlement contract, the prevailing party shall be entitled to reasonable attorney's fees. And I should correct my earlier statement about attorney's fees having to do with an action for breach of contract if Raymat or Doctor Lin violates the ten-year bar. Let me restate that in the same way that if such an action for breach of contract takes place, then the prevailing party shall be entitled to reasonable attorney's fees.

The bolded sentences were not bolded in the transcript, of course, and the bolding above is only to alert the reader to passages of interest in resolving this dispute.

15. The parties then agreed on the record to be bound by the settlement agreement. A stipulation of dismissal was filed and the file was closed.

16. In August 2014, A&C Catalysts transferred $150, 000 to its counsel to hold "in escrow."

17. From May 29 to August 25, 2014, A&C Catalysts never inquired to Raymat about equipment.

18. Counsel for A&C Catalysts then sent counsel for Raymat the following email, dated August 25, 2014, which stated in relevant part (TX 211) (emphasis added):

I wanted to inform you that pursuant to the settlement terms reached between the parties in the above-captioned matter, I have received and deposited $150, 000 into my escrow account as consideration for the sale of the process and technology for LL from Raymat.
Kindly call me to discuss the protocol for transferring the process equipment, technology and all documents to AC&C and in return payment of the $150, 000.00 to Raymat.

Counsel for Raymat responded (TX 211) (emphasis added):

We have the manufacture protocols in both Chinese and English. I will send you the protocols in a separate email. After that, we expect you to release the $150, 000 to Raymat. After Raymat receives the money, and after Mr. [Abraham] Goldstein and his technical staff review the protocol, Jibing [Lin] will give your client 8 hours consultation that are included in the $150, 000 payment.
* * *
P.S. You mentioned "transferring equipment" in your email. That's not part of the agreement as I understand it. Raymat has no right to transfer the contract manufacturer's equipment in any event .

Counsel for A&C Catalysts replied in pertinent part (TX 211) (emphasis added):

To address your P.S. - I believe through the discussions at the conference and settlement terms refers to manufacturing process which in our client's mind included the equipment needed to process LL to make it a turn key operation . $150, 000 is an extreme sum to pay just for documents and 8 hours of consult.

19. That day, counsel for Raymat sent counsel for A&C Catalysts the following email, dated August 25, 2014 (TX 226):

Pursuant to the Settlement Agreement, Raymat hereby provide you as the eschrow [sic] the LL manufacture process in English and Chinese. Raymat expects to receive the payment of $150, 000 by August 29, 2014, as required by the Settlement Agreement.

Attached to that email were (1) a document in Chinese and (2) a translation thereof in English titled "The Manufacturing Process for LL (June, 2012)" ("Raymat's eleven-page process description"). The Chinese version was the document given to the Yantai plant for manufacturing LL. Dr. Lin, however, spent considerable time at the Yantai plant perfecting and adjusting the LL manufacturing process. The eleven-page process description did not include every detail (Dec. 16 Trial Tr. 219-20, 223, 231, 283-84).

20. Counsel for A&C Catalysts then sent counsel for Raymat a letter, dated August 27, 2014, which stated in relevant part (TX 201) (emphasis added):

To date, counsel for A&C has only received from counsel for Raymat partial documentation of the process, which is being held by counsel in escrow. From counsel's brief review, this documentation appears to be an overview or "recipe" for the LL protocol. However, the agreement and the understanding between the parties was to transfer the complete manufacturing process, in order for A&C to produce LL immediately, thus the high value of $150, 000 consideration was offered. Therefore, as the parties agreed at the settlement conference, and as the settlement conference transcript makes clear, in exchange for $150, 000 Raymat is to provide (1) the manufacturing process, (2) documentation of that process, and (3) eight hours of consulting time. To date Raymat has delivered into escrow only partial "documentation of that process, " item (2), but not the process equipment and technology necessary to make the manufacturing process useful to A&C .
Upon receipt of the complete manufacturing process - including equipment, technology, and all production documentation - A&C will release the funds from escrow....

21. Counsel for Raymat then sent a three-page response letter, dated August 29, 2014, which stated in pertinent part (TX 202) (emphasis added):

Contrary to what you stated in your letter, ACC did not promise to pay $150, 000 just for the documentation, but for the intellectual property (i.e., trade secrets and know-hows) of Raymat.
* * *
If your client had wanted to include the LL production line or any equipment thereof, your client could have easily added a sentence to make it clear.
* * *
As of now, Raymat has delivered its trade secrets and know-hows of LL manufacturing process to ACC's counsel. Contrary to your baseless claim, the protocol that Raymat delivered is the only process description that Raymat has. A competent chemical engineering plant should be able to implement the protocol to manufacture LL. Raymat has no other documentation or information that can be disclosed to ACC regarding the LL manufacturing process ....

22. Counsel for A&C Catalysts then sent counsel for Raymat a letter, dated September 11, 2014, which stated in relevant part (TX 36):

Even a brief review [of Raymat's eleven-page process description] concludes the document delivered is woefully inadequate - it lacks the most basic elements of standard manufacturing documentation. Rather, the document appears to be "lab notes" or observations from viewing LL production. Because the documentation does not even describe the equipment used, it is difficult to tell. But certainly, this single document cannot possibly be considered to be the "documentation of the process" of a commercial scale operation. Specifically, the document does not contain the following basic elements, which any manufacturer would have:
• Equipment Lists
• Batch Sheets
• Raw material specifications and sourcing details
• Quality Control testing results and test methods
• Standard Operating Procedures for manufacture of LL
• A schematic of the LL production layout

23. The same day, A&C Catalysts commenced the instant action against Raymat, alleging breach of the settlement agreement, intentional misrepresentation, false promise, and declaratory judgment. Raymat filed a counterclaim against A&C Catalysts, alleging breach of the settlement agreement and fraud.

24. Counsel for Raymat also sent a six-page response letter, dated September 23, 2014, which argued that what A&C Catalysts called the "basic elements" (with one exception) were "not inherent" to a manufacturing process and were "merely documents that are derived from the manufacturing process" (TX 37). The one exception was that, in Raymat's view, the "standard operating procedures" had been disclosed in the eleven-page process description.

25. At the initial case management conference, the undersigned judge tried to grasp how the recent settlement agreement had fallen apart so quickly. Counsel for A&C Catalysts stated that the phrase "LL manufacturing process" encompassed equipment (TX 139, Nov. 12 Tr. 14-15):

Court: Are you [A&C Catalysts] saying that they [Raymat] were supposed to turn over equipment, like a vat or a giant mixer or tubing, and that they - Raymat - had to turn that kind of stuff over?
A&C: Your Honor, depending on the specialization.
Court: Can you say "Yes" or "No"?
A&C: Of the equipment, yes, Your Honor. They were given three months to turn over the manufacturing process. We assumed it would be the equipment and all of the technology, such that A&C could, in its plant, install the process, and start making the chemical. That's what they were purchasing.
Court: But they say the process just means the IP part - the way to do it - not the equipment.
A&C: Correct. And not only that, but they also say that they don't even have that IP, or they don't - the batch sheets, the other - the schematic of the plant, the equipment list. They say everything is in the possession of Yantai, so we can't give you anything. All you get for [$] 150, 000 is one document that just describes the process, and doesn't even provide any assurances that that's the actual process that they were using....

26. A&C Catalysts' pretrial briefs, dated December 1, 2014, continued to argue that "specialized equipment" was required by the settlement agreement (Dkt. Nos. 49, 52).

27. A three-day bench trial occurred from December 15 through 17, 2014. A&C Catalysts called Dr. David Dodds (expert witness), Dr. Gary Huvard (expert witness), Abraham Goldstein, and John Wolfe. Raymat called Dr. Jibing Lin, Jim Turner, and Dr. Walter Goldstein (expert witness).[*]

28. Since May 2014 (when the settlement agreement was entered), A&C Catalysts has been able to meet its LL orders based on existing inventory. Raymat, however, has not requested that the Yantai plant provide any of the "production records" requested by A&C Catalysts.

29. All further findings will be included with the analysis and conclusions of law.

ANALYSIS AND CONCLUSIONS OF LAW

30. In resolving this dispute, the Court has relied on the actual words used in the express settlement agreement and consulted all of its terms, for what light they may shed, on the terms now in dispute. As to words found to be ambiguous, the Court has further considered the actual communications between the parties leading up to the settlement agreement and viewed them in the way reasonable parties in the same circumstances would have understood them. The parties agree that California law applies.

31. While industry custom has some relevance, the true test in our case is how reasonable parties in similar circumstances, knowing what they knew leading up to the agreement, would have understood the term "LL manufacturing process" to mean as used in the settlement agreement placed on the record. Undisclosed "understandings" do not count for much.

32. Here are the key provisions of the three-page settlement agreement read into the record (TX 20) (emphasis added):

Raymat and Doctor Lin agree to leave the LL business entirely and worldwide for a period of ten years. Raymat and Doctor Lin cannot operate LL business through any subsidiary or shadow company during that time, including but not limited to, working with the Yantai plant to produce LL, or to introduce anyone to the LL business using the Yantai plant.
Raymat and Doctor Lin cannot disclose the LL manufacturing process to anyone during this ten-year period, except for ACC. If Raymat or Doctor Lin violate the ten-year ban, then ACC can sue them for breach of contract with a liquidated damage clause of $2, 000, 000. If such a breach of contract is pursued, the prevailing party shall be entitled to seek reasonable attorney's fees.
* * *
In addition [to purchasing inventory], ACC will pay $150, 000 to Raymat to purchase Raymat's LL manufacturing process, along with documentation of that process, in both English and Chinese, as well as eight hours of support time for teleconferencing with Doctor Lin. The manufacturing process will be provided to ACC by no later than August 29th, 2014 and ACC will pay Raymat the $150, 000 by no later than August 29th, 2014.

The dispute thus boils down to what "LL manufacturing process, along with documentation of that process" means. Noticeably absent from the settlement agreement was the word "all" before the phrase "documentation of that process."

33. This order finds that reasonable parties in similar circumstances using similar language would have understood that Raymat promised to provide A&C Catalysts a written description of the LL manufacturing process actually used at the Yantai plant in China in sufficient detail that it could be duplicated at A&C Catalysts' plant in New Jersey. Raymat's eleven-page process description did not include all details known to the Yantai personnel and it is clear that at least some of those details known by the Yantai plant should have been provided to A&C Catalysts.

34. Every single detail, however, was not required so long as (1) the detail would have been obvious and clear cut to those skilled in this trade, i.e., not left to guesswork or experimentation; (2) the detail was obviously so non-critical that modest variations would have made no material difference; or (3) the detail was a mere clarification of the type that could reasonably have been expected to be answered in the eight hours of teleconferencing time with Dr. Lin.

35. Indeed, the eight hours of teleconferencing time with Dr. Lin shows that the parties understood that the description would still leave some questions unanswered and that verbal input from Dr. Lin would be needed to fill in the blanks (Dec. 16 Trial Tr. 237-38).

36. Although Raymat turned over all documents in its possession that summarized or described the LL manufacturing process, Raymat was wrong to insist that its promise was limited to only extant documents in its actual possession. For example, Raymat argued in this satellite litigation (Dkt. No. 65 at 7) (emphasis added):

The settlement agreement only says that A&C agreed "to purchase Raymat's LL manufacturing process, along with documentation of that process." The most direct interpretation is that the purchase was for whatever that [sic] Raymat has. There is no guarantee as to the quality of the manufacturing process or the amount of the details contained in the "documentation." It included 8 hours of free consultation designed for filling in details that may be lacking in the preexisting documentation. The Settlement Agreement certainly does not require Raymat to generate a report as part of the "documentation."

This contention is rejected. The promise made by Raymat was not a response to a Rule 34 document request. It was a promise in a contract. Raymat was obliged to provide the promised information even if it had to take steps to obtain it and to reduce it to writing, including, as necessary, to obtain the required information from its contract manufacturer, the Yantai plant. Raymat was obliged to eliminate all guesswork as to the actual process at the Yantai plant, save and except for items described in paragraph 34 above.

37. On the other hand, and contrary to A&C Catalysts, Raymat was not required to go to Yantai, China and collect every record relating to LL. Raymat was, however, obliged to obtain from the Yantai plant any documents and information needed to fulfill its promise. A&C Catalysts was reasonable in presuming that Raymat had a contractual right to obtain such materials and information from the Yantai plant, but if Raymat had earlier neglected to obtain such a right of access, that neglect was and must remain Raymat's problem. The fact that Raymat had no ownership in the Yantai plant did not relieve Raymat of its promise in the settlement agreement. It was reasonable for A&C Catalysts to expect that Raymat was in a position to obtain the required information from the Yantai plant by virtue of Raymat's pre-existing relationship with the Yantai plant, including any contractual duty of the contract manufacturer to supply information to its customer. (Raymat's president testified at trial that he was still able to obtain information from the Yantai plant (Dec. 16 Trial Tr. 247, 265, 267).) Indeed, in the chemical manufacturing industry, unless otherwise specified by contract, the company that hires a contract manufacturer typically has access to some production documentation for the contracted manufacturing process.

38. This order rejects Raymat's patent analogy. That is, Raymat contends that its eleven-page process description should be treated like a high-level specification in a patent and all details of implementation should be left to the imagination of those having ordinary skill in the art. A&C Catalysts, however, bought a very specific process - the LL manufacturing process actually used at the Yantai plant - not a potpourri of potential ways of manufacturing LL. A patent specification is usually more general and leaves some details to the imagination of those skilled in the art. The promise made here, however, was to describe a very particular process actually used at a specific plant.

39. This order rejects Raymat's contention that it only needed to disclose its own "trade-secret" improvements over the Ajinomoto patent. To the contrary, Raymat agreed to disclose the full A-to-Z process, save for the minor details referenced above in paragraph 34.

40. This order also rejects Raymat's contention that the non-disclosure clause (with its two million dollar penalty) somehow limited Raymat's promise to simply revealing those parts of the LL manufacturing process that Raymat decided were "trade secrets." That would have been an illusory promise, leaving Raymat free to whittle down its disclosure to a few limited nuggets. The real purpose of the non-disclosure clause was to prevent Raymat and Dr. Lin from going out and cranking up a new LL factory or selling the process to someone else who would then compete with A&C Catalysts. In other words, one purpose of this agreement was to suppress LL competition from Raymat, directly or indirectly.

41. This order recognizes that some details might (or might not) be filled in by the Ajinomoto patent but A&C Catalysts should not be forced to engage in mix-and-match guesswork, especially since Raymat admits its own process had "secret" improvements over the patented process as to color, yield, and smell.

42. This order further rejects Raymat's contention that the blanks can be filled in by trial and error so long as the extent thereof is not "undue experimentation." A&C Catalysts should not have to resort to filling in the blanks through trial and error. If the missing information is clearly obvious, it need not be provided, but non-obvious specifics discovered by Raymat and used at the Yantai plant were obliged to be disclosed.

43. Contrary to Raymat, the discussion between A&C Catalysts and Raymat during the settlement negotiation about introducing A&C Catalysts to the Yantai plant - which was not expressed in the settlement agreement - did not replace Raymat's express promise in the settlement agreement to supply the required information.

44. This order rejects Raymat's contention that it was excused from performance merely because A&C Catalysts' counsel wrongfully demanded physical equipment in their emails prior to the latest lawsuit.

45. To be sure, A&C Catalysts was wrong, in its emails prior to the latest suit, to contend that Raymat promised to provide physical equipment from China. This order further rejects A&C Catalysts' contention that A&C bought a "turn-key" operation. The settlement agreement called out "inventory" and "process, " but it did not call out "equipment." Although in the trial, A&C Catalysts backed off these contentions (after the judge earlier questioned the legitimacy of these contentions at the final pretrial conference), there is no doubt that A&C Catalysts' overreaching demand for a "turn-key" operation and physical equipment (in China and not owned by Raymat) was a material factor leading to this satellite litigation. (So was Raymat's obstinate position.)

46. This order rejects A&C Catalysts' further contention that Raymat's eleven-page process description is "not a useful document." To the contrary, this order finds that the document describes the LL manufacturing process in meaningful and sincere ways - even though it falls short in certain other ways.

47. In sophisticated purchases between large companies, the contracts often expressly call for a long list of disclosures, lists, and diagrams, and such items are typically provided at closings. This practice is not very relevant here because we have a pithy three-page settlement agreement in which much, much less was specified - only the phrase "LL manufacturing process" was used. A&C Catalysts' argument that the entirety of sophisticated practices in more sophisticated deals should be shoe-horned into the tiny passage used in this settlement agreement is rejected.

48. A&C Catalysts has been too hypercritical of Raymat's eleven-page process description (TX 8). For example, A&C Catalysts' experts testified that they could not tell what kind of purified water was required, what "low speed" meant, what type of centrifuge was used, how many storage tanks were needed, and so forth. Had A&C Catalysts taken advantage of the eight hours of teleconferencing time with Dr. Lin, it would have learned almost all of the details it now contends are missing. A&C Catalysts should have taken advantage of the eight hours of teleconferencing time to fill in the alleged missing details before filing this lawsuit. There is a very good chance that most, if not all, questions could have been answered. Dr. Lin has extensive personal knowledge of how the LL manufacturing process at the Yantai plant worked (Dec. 16 Trial Tr. 223, 241-46).

49. This order rejects A&C Catalysts' position that the stoichiometry and the underlying chemical equations behind each step had to be spelled out. Indeed, the president of A&C Catalysts testified that he showed the Ajinomoto patents and the "chemistry behind LL" to Raymat (Dec. 15 Trial Tr. 77, 138). If the specified steps in the LL manufacturing process would result in the LL described, then the interim chemical equations would be superfluous.

50. This order further rejects A&C Catalysts' proposition that the "environmental" documents and the thousands of pages of "batch documents" had to be provided - except to the limited extent, if at all, that their contents would be needed to supply the required process information referenced above. Nor was a high-level flow diagram required so long as the materials provided described the flow of steps. A&C Catalysts' contention to the contrary is rejected.

51. This order recognizes that the experts retained by A&C Catalysts testified to a long "shopping list" of diagrams and lists that should have been supplied. The Court has discounted some of this testimony in view of the bias of these paid witnesses, one of whom candidly admitted that, as a hired expert, he was a "mercenary" (his term).

52. This order finds that A&C Catalysts knew that the Yantai plant was a contract manufacturer for Raymat and that the Yantai plant was separate from Raymat (even though A&C Catalysts may not have known the particulars of the relationship). In turn, A&C Catalysts knew that at least some documentation in Yantai might be impractical for Raymat to obtain and that Raymat would only use good faith efforts to obtain documents from the Yantai plant. Again, the eight hours of teleconferencing time would likely have answered questions even though unproduced documents in Yantai also might have answered them.

53. No damages have been proven. Contrary to A&C Catalysts' demand for $340, 000, there is no evidence in the record supporting that amount or any amount of specific, non-speculative damages. Contrary to Raymat's demand for an unspecified amount of compensatory damages in the form of "unjust enrichment" and "up to $1 million dollars of punitive damages, " as stated in its pre-trial brief, nothing in the record supports this demand. This order notes that in its post-trial proposal, Raymat sought only $150, 000 plus interest. No monetary relief will be provided other than that stated in the order for relief herein. Fees and costs shall be decided, if appropriate, pursuant to the schedule set forth in Civil Local Rule 54.

ORDER FOR RELIEF

A. To the extent stated below, this order finds that Raymat's eleven-page process description (TX 8) was inadequate to meet Raymat's obligation under the settlement agreement and hereby orders Raymat to supply on or before JANUARY 30, 2015, the following:

1. A list of equipment actually used in the Yantai plant for the LL manufacturing process, setting forth the key specifications of the equipment. (If the equipment make and model numbers are available, that will suffice.) Specialized equipment must be described in greater and sufficient detail to allow duplication.
2. One or more diagrams that show how equipment items were interconnected at various stages in the process.
3. A list of raw material specifications and purity actually used at Yantai.
4. If analytical tests and samples were taken along the way by the Yantai plant, then those must be described. If there were none, that must be stated.
5. All precautions taken in the LL manufacturing process at Yantai for health and safety reasons must be described. If there were none, that must be stated.

All of this information must be provided to A&C Catalysts by JANUARY 30, 2015. The $150, 000 required by the settlement agreement will remain in escrow pending further order.

B. At least two weeks before seeking teleconferencing support from Dr. Lin, A&C Catalysts must email Dr. Lin a list of specific questions sought to be discussed during the session. The list must be limited to ten questions per hour of teleconferencing time. It shall be no objection to answering that the information requested is obvious. If Dr. Lin does not know the answer, he should say so rather than guess. The teleconference must be completed by FEBRUARY 20, 2015. It shall be recorded in video and sound.

C. By FEBRUARY 24, 2015 AT NOON, both sides shall file a joint statement advising whether there is any disagreement concerning compliance and stating the specifics of any disagreement. If there is any disagreement, the parties shall also jointly provide the names of two qualified expert witnesses possibly to be appointed under Rule 706 of the Federal Rules of Evidence and/or Rule 53 of the Federal Rules of Civil Procedure to assist the Court in resolving the dispute with the expense of the witness/master to be borne by the parties in proportion to their culpability. Please do not communicate, directly or indirectly, with any such nominee except that both counsel shall contact the two nominees by joint telephone conference to ascertain their availability and to check for conflicts. Do not advise the Court or the nominee as to which side suggested their names except that, if there is any objection by one side to the other side's nominee, that objection may be made to the Court.

D. Except as allowed herein, A&C Catalysts is hereby enjoined from using the information in Raymat's eleven-page process description in any way pending further order.

* * *

Finally, the agreement in question includes an agreement not to compete for ten years. (This followed an earlier exclusive supply agreement that cratered and led to the original lawsuit.) Given the limited number of manufacturers of LL in the world and in view of the exclusion of Raymat from the LL business for ten years under the settlement agreement in question, this order now states that in no way does the Court bless or immunize the agreement from liability under the Sherman Act . The parties shall not pretend or otherwise represent to others that the Court in any way blessed this agreement not to compete. Because of the possibility that this agreement unlawfully restrains and suppresses competition, the Clerk shall forward a copy of this order to the Antitrust Division of the Department of Justice. Both sides shall preserve all evidence in the event that the Justice Department asks to review it. Nevertheless, nothing in this paragraph modifies the relief ordered above.

IT IS SO ORDERED.


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