Antitrust Law Daily Wrap Up, ANTITRUST—EDMich: Statute of Limitations Bars Claims Challenging Acquisition, Post-Acquisition Conduct, (Feb 6, 2013)

By Jeffrey May, J.D.

An antitrust action challenging a 2007 acquisition that combined the oxidate assets of two rival chemical companies and the acquirer's subsequent conduct was barred by the statute of limitations, the federal district court in Port Huron, Michigan, has decided. The plaintiff, Z Technologies Corporation, unsuccessfully argued that the date on which the acquisition was consummated, which was more than five years before the suit was filed, was not the most recent date from which the four-year statute of limitations should be measured (Z Technologies Corp. v. Lubrizol Corp., February 5, 2013, Zatkoff, L.).

Z Technologies was a purchaser of unmodified oxidates, which it used to manufacture and sell anticorrosion products to vehicle manufacturers and others. The suit challenged specialty chemical manufacturer Lubrizol Corporation’s acquisition of the oxidate assets of rival Lockhart Company, as well as Lubrizol's alleged monopolization of the U.S. market for unmodified oxidates following the purchase. Oxidates are made, essentially, from oxidized petroleum based wax. Wax oxidates are a component of finished rust protection products that generally are applied to metal surfaces to inhibit rust corrosion.

The acquisition at issue was the subject of an FTC enforcement action in 2009. In its complaint, the agency took issue with a non-competition agreement that prohibited Lockhart, for a period of five year, from competing with the assets it sold to Lubrizol, including leasing its plant in Flint, Michigan, to another oxidate manufacturer. Under an FTC consent order resolving the allegations, Lubrizol was required to transfer certain assets to a third party and to waive its non-compete agreement with Lockhart in order to facilitate Lockhart's leasing of a portion of its Flint plant to the third party.

For purposes of its Clayton Act, Section 7 claim, Z Technologies had argued that that “holding assets violates antitrust law as much as acquiring them,” and that “while typically Clayton Act Section Seven violations accrue at the time of the initial merger,…when the acquiring firm changes the way it uses the acquired assets, the statute of limitations is restarted.” It contended that Lubrizol's use of the non-competition clause after the acquisition to prevent Lockhart's re-leasing of the Flint plant to prospective oxidates manufacturers was "new" and fit within the “new use” doctrine.

The court agreed with Lubrizol that the “hold-and-use” doctrine relied upon by Z Technologies applied only where an acquiring firm took some action after the transaction to use an acquired asset in a way that caused a new or different injury. The “hold-and-use” doctrine did not apply when the merger itself caused the plaintiff the same kind of injury as the “new” use of the asset. The court went on to say that a continuing violation theory was inapplicable under Section 7.

Thus, the very latest Z Technologies could have been aware of its alleged injuries and its potential Section 7 claim with respect to Lubrizol's “holding and use” of the assets in the 2007 merger was during calendar year 2007. Because Z Technologies did not file its action until May 18, 2012, the Section 7 claim was time-barred.

Monopoly Claims

For purposes of its monopoly claims, Z Technologies argued that Lubrizol's post-acquisition price increases and actions to prevent the re-leasing of the Flint plant were new and independent acts that amounted to continuing violations of the Sherman Act. As a result, Z Technologies contended, these acts restarted the statute of limitations period.

The court concluded, however, that the non-competition clause and the price increases that occurred in 2007 and 2008 were not new, independent, overt acts that were unrelated to the merger. The court also questioned the application of the continuing violations theory beyond conspiratorial conduct claims under Section 1 of the Sherman Act. In the court's view, “no action occurred which served to ‘further’ the merger or otherwise violate Section 2 of the Sherman Act” after the acquisition closed in February 2007. Thus, the complaint was dismissed.

The case is No. 12-12206.

Attorneys: Jeffrey T. Meyers (Morgan Meyers) for plaintiff. Elizabeth A. Grove for defendant.

Companies: Lubrizol Corporation; Z Technologies Corporation; Lockhart Company

Cases: Antitrust MichiganNews