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US Magnesium LLC v. ATI Titanium LLC

United States District Court, D. Utah

April 19, 2019

US MAGNESIUM, LLC, a Delaware limited liability company, Plaintiff and Counterclaim-Defendant,
ATI TITANIUM LLC, a Delaware limited liability company; ALLEGHENY TECHNOLOGIES INCORPORATED, a Delaware corporation, and DOES 1-20, Defendants and Counter-claimant.



         Before the Court are two Motions to Dismiss-one filed by Plaintiff and Counterclaim-Defendant U.S. Magnesium, LLC ("US Mag") (Dkt. No. 108) and one filed by Defendant and Counter-Claimant ATI Titanium LLC ("ATI") (Dkt. No. 133)-as well as associated evidentiary objections and a motion for discovery. (Dkt. Nos. 151, 160, 168.) The Motions have been fully briefed by the parties, and the court has considered the facts and arguments set forth in those filings. Pursuant to civil rule 7-1(f) of the United States District Court for the District of Utah Rules of Practice, the Court elects to determine the motion on the basis of the written memoranda and finds that oral argument would not be helpful or necessary. DUCivR 7- 1(f).


         This action arises out of a Supply and Operating Agreement (the "Agreement") entered into by U.S. Mag and ATI in September of 2006. The Agreement provided for a symbiotic relationship in which U.S. Mag would produce raw magnesium, which it sold to ATI at a set price for the manufacture of titanium sponge. U.S. Mag's magnesium production process required magnesium chloride as input, which ATI's titanium sponge manufacturing process produced as a by-product. ATI provided magnesium chloride from its manufacturing process to U.S. Mag for the manufacture of magnesium.

         The companies operated neighboring plants pursuant to the Agreement for several years until mid-2016. The agreement contemplated a twenty-year term, subject to ATI's right to terminate its performance pursuant to an "Economic Force Majeure" provision. The Economic Force Majeure provision provided that ATI could "suspend its performance" under the Agreement if it obtained "a bona fide, good faith and arms' length written contract offer" to purchase titanium sponge for five years at a price 85% or below that of ATI's "variable costs to produce titanium sponge...." §11.2(a). The provision further provided that ATI could "suspend its performance under th[e] Agreement, including, without limitation, its purchase of Magnesium under th[e] Agreement, upon at least one hundred eighty (180) days' prior written notice to [US Mag]." Id. During the 180-day period, the parties were to "enter into good faith negotiations.. .to attempt to negotiate revised pricing for Magnesium" pursuant to the schedule set forth in the Agreement.

         In a letter dated August 23, 2016, ATI wrote to U.S. Mag "declaring an Economic Force Majeure pursuant to Section 11.2 of the Agreement...." (Dkt. No. 17 at ¶ 13.) ATI notified U.S. Mag that it would suspend its performance 180 days following the letter. Shortly thereafter, during the 180-day period, ATI idled its plant. The parties engaged in some discussions during the 180-day period, but they disagreed on several points, including which auditor to use for the audit contemplated by the Agreement. Ultimately, their discussions were unsuccessful at resolving their dispute.

         US Mag initially filed suit on October 12, 2016, which was removed to this court on November 11, 2016. That action was dismissed without prejudice to allow the parties to engage in mediation, as set forth in the Agreement. Following an unsuccessful mediation, ATI brought this action on August 15, 2017. (Dkt. No. 2.) On January 11, 2018, on motion of the parties, this action was consolidated with an action which was filed by U.S. Mag in state court and removed to this court on August 29, 2017-2:17-cv-976. (Dkt. No. 39.) Subsequently, both parties amended their Complaint/ Counterclaim to include claims against the other's parent company. (Dkt. Nos. 100 and 117.)

         ATI brought claims for intentional interference with contract and economic relations against the Renco Group ("Renco"), U.S. Mag's parent company. (Dkt. No. 100.) ATI alleged that, on information and belief, Renco prevented U.S. Mag from negotiating in good faith with ATI in order to force ATI into economic duress and purchase ATI at a steeply discounted price. (Id.)

         US Mag brought claims against Allegheny Technologies Incorporated ("Allegheny"), ATI's parent company, under an alter ego or principal/agent theory, arguing that Allegheny was responsible for the actions of ATI. (Dkt. No. 117.) In support of its alter ego and principal/agent theory, U.S. Mag alleged "commingling of business operations; common management and legal representation; sharing of headquarters and employees in Pittsburgh, Pennsylvania; non-arm's length transactions; consolidated summaries of operations and financial statements; absence of corporate records for ATI; a failure to follow corporate formalities on the part of ATI; and Allegheny's siphoning of funds from ATI, causing ATI to be (and remain) undercapitalized, despite Allegheny's substantial earnings from the products produced at the Titanium Sponge Plant." (Id. at ¶ 4.)


         "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombfy, 550 U.S. 544, 570 (2007)). Plausibility, in the context of a motion to dismiss, constitutes facts which allow "the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

         Under Rule 12(b)(6), the court must accept all well-pleaded allegations in the Amended Complaint as true and view those allegations in the light most favorable to the nonmoving party. Stidham v. Peace Officer Standards Training, 265 F.3d 1144, 1149 (10th Cir. 2001) (quoting Sutton v. Utah Sch.for the Deaf & Blind, 173 F.3d 1226, 1236 (10th Cir. 1999)). The Court must limit its consideration to the four corners of the Complaint, and any documents attached thereto, and any external documents that are referenced in the Complaint and whose accuracy is not in dispute. Oxendine v. Kaplan, 241 F.3d 1272, 1275 (10th Cir. 2001); Jacobsen v. Deseret Book Co., 287 F.3d 936, 941 (10th Cir. 2002).

         US Mag and Renco 's Motion to Dismiss (Dkt. No. 108)

         In its Second Amended Counterclaim and Third-Party Complaint, ATI speculated that its pricing negotiations with U.S. Mag broke down after U.S. Mag communicated with its parent, Renco. (Dkt. No. 100 at ¶¶ 30-34.) ATI then alleged that the inference can be drawn that Renco interfered with the negotiations self-interestedly, and initiated suit in order to purchase ATI at a reduced price. (Id. at ΒΆ 12.) Even assuming that ATI's speculative ...

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