Dow awarded $1.62 billion more from Nova Chemicals

As for how the breach lasted that long, Yorke-Slader explains that the deal between Dow and Nova involves an 80-year contract and that so far, “it’s been a bad marriage, but the problem has been there’s always hope.”

Dow and Nova didn’t start off getting married. In 1997, Union Carbide and Nova signed a joint venture to build a plant that produces ethylene, a key ingredient required for producing plastics. Nova’s role in the arrangement was to run the plant. Dow, however, took over Union Carbide, which put the two companies, which Yorke-Slader describes as “bitter rivals,” in business together.

“Virtually from the moment the plant was constructed, we say – and the judge found – that there were bad things done that resulted in Dow not getting as much ethylene as it should have.”

Yorke-Slader explains that Dow was shortchanged in two essential ways. First, a court found that Nova was taking some of the ethylene that was supposed to be allotted to Dow for itself. Second, Nova wasn’t running the plant at full capacity, which is what Dow needed and was Nova’s duty to ensure.

With the contract breaches determined, the next step was to set the damages. This, says Yorke-Slader, posed some difficulties as there is essentially no market for ethylene in the province. Producers, such as Dow, tend to use the product themselves to manufacture plastics, so the company’s calculable losses could only be measured in how much potential plastic product they failed to be able to produce. Arguments were also presented about what the maximum capacity for the plant could theoretically be.

In her decision of June 5, Justice Barbara E.C. Romaine, however, found a logical way of approaching the calculation. She pegged the plant’s maximum operating capacity to its government-permitted nitric oxide and nitrogen dioxide output limits – its NOx emissions limit.

“It seems sensible, right? The law is supposed to be common sense. There’s a lot of mystery about what lawyers do and how we’re special experts, but I think at the end of the day, most legal matters that judges decide are decided in a way that most people would say is common sense, and it offends common sense that you would endorse running a plant at an environmentally irresponsible level,” says Yorke-Slader.

Another determination the judge had to make in the damages award involved converting American dollars to Canadian ones. The ethylene business tends to work in the US currency, but the damage award needed to be calculated in Canadian dollars. The question before the court was what date should be used to calculate the conversion: the date of the breach or the date of the judgment?

With the dollar fluctuating, York-Slader said it was in Dow’s interest to pick the conversion date as the day of the judgment, not the original breach date, and the judge agreed.

“One of the great things that I’ve learned over many years in practicing law is that generally speaking, the law is sensible, and the law says that if you have to figure out when you’re going to convert currency, and the plaintiff is the victim and the defendant is the wrongdoer, and the plaintiff’s been put out of its money until now, then the court should pick the date that, on balance, is most favourable to the victim, not the wrongdoer –– that the equities favour the victim,” says York-Slader.

As mentioned earlier, this is the second award for damages. The first, the $1.43 billion, was the figure tied to the specific losses that Dow incurred from the start of the plant’s operation until 2012. But with the contract continuing and Nova continuing to insist that it was doing nothing wrong and would continue operating in the same manner that it had been, the courts needed to address that situation as well, which it did with a five-and-a-half-year “top-up” period. The most recent decision, ordering a $1.62 billion payment, is to cover the top-up damages.

And there is still one more decision from the judge yet to come. As Yorke-Slader explains, it doesn’t have anything to do with damages. Instead, he describes it as having only “esoteric interest” to contract lawyers.

He says Dow’s takeover of Union Carbide united the only two competitors in the province’s ethane and ethylene markets. The contract stated that Nova was buying all of the ethane for the ethylene plant and that once it entered into the contract, it was unable to purchase any other ethane for any other reason, creating an untenable situation.

“The courts found it was anti-competitive, so they ordered it severed from the contract. It’s like you take your little scissors and cut that clause out of the contract. But the question remains: is there anything else to cut out? And that issue remains to be decided by the judge.”

Justice Romaine referenced her upcoming retirement on July 3 and her long involvement with this case in her judgment. Yorke-Slader expects her to deliver a ruling on the “cut out” question and on the awarding of costs. He points out that after judges retire, they have three months to finish writing and submit any final, outstanding decisions.

“Justice Romaine is an outstanding and patient judge… She’s been looking after us for more than a decade. There's no secret. She’s approaching her retirement, and I’m sure would like to tidy this up. And, it certainly would be very good for the judicial system that it all be tidied up.”

But even then, this case won’t be wrapped up. Yorke-Slader estimates about 10 outstanding appeals, which he expects will be before the courts next year.

“Once or twice, they’ve tried to pursue the appeal, and each time, the courts just said, ‘look, come back when you've finished. We’ll just pile them up over here on the side and once the case is over, bring them all to us. Tell us which ones you are serious about, and we’ll put them all together and argue them.’... That is the next step now. Appeals take a lot less time, or should than the trials, and people are forced to choose what they’re going to argue. They can’t argue everything anymore, so there’s reason to think that that process can be handled fairly efficiently and properly.”

But despite the years in court and the long, protracted legal battles, Yorke-Slader holds the entire process up as a model of civility, at least among all the lawyers involved. He says he turned to Randall Hofley and Kevin MacDonald, lawyers from Blake’s who were involved in the original anti-trust case between Dow and Union Carbide, for some assistance.

He also calls out Nova’s legal representative, the now-retired William J. Kenny, as a “wonderful gentleman who drew the short straw with a very difficult task… If there’s a lesson we can all take away, it’s that we can treat each other with a reasonable amount of courtesy and respect, no matter whether our clients get along or not,” says Yorke-Slader.

While it’s been a long journey to get to this point, Yorke-Slader is looking forward to what’s yet to come with the case.

“It’s been a remarkable experience for me as a lawyer. Given the amount at stake you have as a lawyer, as a professional, you have this opportunity to attack this with all of the resources you can muster. There are no excuses. This is why we went to law school, so we could do stuff like this and not have to compromise and not do something because it would add cost. When you’re dealing with cases of this size, you get to do the very best you can. To someone thinking about going into law as a career, a case like this is a wonderful way to spend your career [even if] you’ve got to work a long time to get to them.”