Longview Aluminum Files Suit Against Alcoa
Longview, WA - Officials at Longview Aluminum have filed suit against Alcoa, Inc. for declaratory, injunctive and other relief related to specific terms of a $6.897 million ground lease signed as part of the purchase of the Washington State smelter.
The suit, filed on February 12 in United States District Court for the Northern District of Illinois, seeks to confirm that labor unrest associated with Longview Aluminum's inability to secure a long-term collective bargaining agreement with its United States Steelworkers of America work force constitutes a "force majeure" that invalidates an early termination provision of the ground lease. Further, the suit alleges that the Longview Aluminum officials agreed to these early termination provisions only under "economic duress."
Current owners, Longview Aluminum LLC, acquired the company primarily as a result of a 2000 European Union ruling that required a 25 percent divesture of interest as a condition of approval of the merger between Reynolds Metals Company, the smelter's previous owner, and Alcoa, Inc. The divestiture was mandated to preserve competition and ensure a long-term supply of high-purity aluminum, an essential component in many aerospace and defense applications.
At the time of purchase, the new owners elected to curtail operations and sell the company's power allocation back to the Bonneville Power Administration (BPA) in response to unprecedented, dramatically increasing electric power prices resulting from high demand. Concurrently, Longview Aluminum officials sought to secure alternative short- and long-term power sources.
"We now believe that Alcoa and Reynold's knowledge of our obligation to curtail the smelter and reassign our power allocation to the BPA after closing prompted them to impose eleventh-hour conditions on the sale," said Longview Aluminum Vice Chairman John Kolleng. "These conditions were specifically and deliberately designed to circumvent the antitrust protections established by the EU, violating both the letter and the spirit of their divestiture requirement.
Kolleng continued, "We also believe that these conditions resulted from Alcoa's malicious intent to thwart our long-term business strategy and reduce our ability to successfully operate the facility." He stressed that the new owners signed the agreement only under "economic duress" to protect their many contractual commitments, including those with their lenders and the BPA.
The condition referenced by Kolleng is a requirement that if the new owners failed to operate one potline for four continuous months out of each 22-month period, the ground lease would terminate and the land would revert back to the newly-merged Alcoa-Reynolds entity. Under these terms, Longview would have been required to restart smelting operations no later than September 1, 2002.
However, the ground lease does provide for further exceptions for certain "force majeure," including labor shortages or unrest. Longview Aluminum officials notified Alcoa in April 2002 that their inability to reach a new collective bargaining agreement with the USWA, as well as resulting litigation, multiple grievances and claims of unfair labor practices filed with the National Labor Relations Board necessitate the activation of this "force majeure" clause.
While originally insisting upon activating the automatic termination provisions, in October 2002, under the threat of litigation, Alcoa agreed to a short-term extension of the smelter restart date to January 31, 2003.
"The USWA even sent Alcoa a letter specifically expressing their support for our position, yet Alcoa was unmoved," said Michael Lynch, chairman of Longview Aluminum. "Only after we filed this lawsuit did Alcoa agree to another short-term extension. We believe that litigation is the best remedy available to us in the face of continued aggressive and monopolistic behavior by Alcoa as they attempt to continue their global domination of and reduce competition in the aluminum industry."
In addition to requesting that the current labor situation at Longview be declared as "labor unrest," entitling the company to a "force majeure" extension of the ground lease, Longview Aluminum's suit against Alcoa also requests a declaration that the early termination provisions be voided as a result of economic duress and requests both a preliminary and permanent injunction against Alcoa until the litigation is concluded.
"My intent is to eliminate this clause from the ground lease entirely," said Lynch. We are going to do everything legally possible to protect our investment in Longview Aluminum and realize our goal of protecting more than 1,000 United States steelworker jobs by restarting this plant as soon as we finalize the terms of our long-term collective bargaining agreement with the USWA."