United States District Court for the District of Columbia
November 19, 2004.
UNITED STATES OF AMERICA, Plaintiff,
BAROID CORPORATION, BAROID DRILLING FLUIDS, INC., DB STRATABIT (USA) INC., and DRESSER INDUSTRIES, INC., Defendant.
The opinion of the court was delivered by: ROYCE LAMBERTH, District Judge
Defendant Smith International, Inc. ("Smith") has moved the
Court for an order construing its obligations under the Modified
Final Judgment entered in this case by Judge Sporkin on September
19, 1996. After Anchor Drilling Fluids U.S.A., Inc. ("Anchor"), a
party to the Modified Final Judgment, filed its opposition and
Smith filed its reply, Anchor moved for leave to file a surreply.
Now before the Court are the motion for leave to file a surreply
and the motion for a construal order. For the reasons set forth
herein, the Court denies the motion for leave to file a surreply
and grants the motion for a construal order. I. BACKGROUND
A. History of the Case
In 1993, the Department of Justice filed this antitrust lawsuit
against Baroid Corporation and Dresser Industries, Inc. to
prevent the two companies' planned merger. The companies assuaged
the Department of Justice and the parties entered into a consent
decree that became embodied in the Final Judgment entered on
April 12, 1994. In compliance with that Final Judgment, Dresser
Industries sold its ownership interest in M-I, a drilling fluids
business, to Smith, which agreed to be bound by the Final
Judgment. The Final Judgment prohibited Smith, as purchaser, from
further acquiring certain other drilling fluid businesses,
including Anchor Drilling Fluids AS of Norway.
On September 19, 1996, about two years after entry of the Final
Judgment, the Court entered a Modified Final Judgment upon the
joint motion of Smith and the Department of Justice. The Modified
Final Judgment permitted Smith to purchase Anchor Drilling Fluids
AS of Norway so long as Smith sold off that company's United
States drilling fluids operation and complied with the Stipulated
Divestiture Agreement filed on June 5, 1996. Smith then acquired
Anchor Drilling Fluids AS of Norway and divested itself of the
United States operation, which led to the creation of Anchor. As
a result of this transaction, Anchor became bound by the Modified
The Stipulated Divestiture Agreement gives Anchor the
opportunity to purchase from Smith unlimited quantities of crude
barite ore, an important component of drilling fluids. The
agreement provides: At the option of the purchaser of Anchor USA
[Anchor], M-I [now Smith] shall supply the purchaser
unlimited quantities of crude barite ore for its own
consumption until five years from the date the order
modifying the Judgment is filed and entered, at a
price no greater than the highest price set forth in
Industrial Minerals Magazine for the month which the
order is placed with M-I for the country from which
the crude barite ore will be sourced and for the
appropriate form of packaging. If the purchaser of
Anchor USA exercises its option to have M-I supply
crude barite ore, it must notify M-I no less than
four months prior to the date of delivery of the
crude barite ore. At the option of the purchaser of
Anchor USA, M-I's obligation to supply crude barite
ore on the terms stated herein may be extended an
additional five years.
Joint Mot. to Modify Final Judgment & Stipulated Divestiture
Agreement ¶ II.G, United States v. Baroid Corp., No. 93-2621
(D.D.C. June 5, 1996).
Since entry of the Modified Final Judgment, Smith has offered
to supply Anchor with crude barite ore, but Anchor has contracted
with Smith to purchase only ground barite ore, not crude barite
ore. (Brown Aff. ¶¶ 14, 21.). Crude barite ore is a "rock-like
material" in a "semicrushed state, with pieces ranging . . . in
size from approximately 12-inch chunks to particles the size of
sand." Id. ¶ 4. Ground barite ore is a finished product: it is
"flour-like" and "ready for sale and use as a drilling fluid
additive." Id. ¶ 5.
Both Smith and Anchor agree that their companies' relationship
has been rocky and subject to a series of ongoing disputes
concerning Smith's supply of barite ore to Anchor. Due to
transportation costs, Smith has had to raise its price for
delivery of ground barite for all customers, including Anchor.
Anchor protested. Brown Aff. ¶ 17. In 1999, Anchor filed and the
parties settled a suit concerning the supply of barite ore.
Earlier this year, Anchor filed a second suit against Smith in
the United States District Court for the District of Oklahoma.
See Compl., Anchor Drilling Fluids, U.S.A., Inc., v. M-I LLC,
No. 04-CV-375 (D. Okla. Apr. 28, 2004). In several parts of the
complaint, Anchor alleged breach of the supply agreement set
forth in the Modified Final Judgment. See, e.g., id. ¶ 34 (as
violation of the Sherman Act), id. ¶ 61 (as violation of the
Oklahoma law), id. ¶ 67 (as violation of the contract law).
B. Motion to Construe
On May 14, 2004, Smith moved this Court to issue an order
construing the September 19, 1996 Modified Final Judgment.
Smith's motion asks the Court to make the following construction
of Paragraph II.G: first, that Smith's obligation to supply
"crude barite ore" does not require Smith to supply ground barite
ore; and second, that the obligation to supply crude barite ore
does not include the obligation to process or deliver that ore.
Smith served its motion on Anchor and on the Department of
Justice. Anchor lodged an opposition with this court; the
Department of Justice has remained silent. Anchor's main argument
is that this Court lacks jurisdiction to enter an order
construing the Modified Final Judgment.
Anchor contends that this Court lacks jurisdiction to issue the
requested construal order because there is no case or controversy
as required by Article III of the Constitution. Anchor is
mistaken on the law. There is "no doubt" that federal courts have
continuing jurisdiction to protect and enforce their judgments
and consent decrees. Central of Ga. R.R. Co. v. United States,
410 F. Supp. 354, 357 (D.D.C. 1976) (citing Riggs v. Johnson
Cty., 73 U.S. (6 Wall.) 166 (1867); Pigford v. Veneman,
292 F.3d 918, 923 (D.C. Cir. 2002). "First, they may interpret and enforce a decree to the extent authorized either by the decree or
by the related order. Second, they may modify a decree pursuant
to Federal Rule of Civil Procedure 60(b)(5)." Pigford,
292 F.3d at 923.
In the present case, the Modified Final Judgment specifically
contemplates that the Court would retain jurisdiction to address
the parties' future needs. The Modified Final Judgment states
Jurisdiction is retained by this Court for the
purpose of enabling any of the parties to this Final
Judgment to apply to this Court at any time for such
further orders and directions as may be necessary or
appropriate for the construction or carrying out of
this Final Judgment, for the modification of any of
the provisions hereof, for the enforcement of
compliance herewith, and for the punishment of any
Final Judgment ¶ XIV, United States v. Baroid Corp., No.
93-2621 (D.D.C. Apr. 12, 1994). Therefore, by the terms of the
Modified Final Judgment, this Court remains open to the parties'
applications for "orders and directions" that "may be necessary
or appropriate for the construction" of the judgment. Id.
Smith's motion, as an application for an order concerning the
Modified Final Judgment's construction, is appropriate and within
the jurisdiction of this Court.
Although Anchor's Article III argument is rejected, Anchor's
assertion of non-controversy, if true, might deprive the court of
its authority to issue a construal order if, by the terms of the
jurisdiction retention clause, the order would be neither
"necessary" nor "appropriate."*fn1 However, Anchor's
assertion of non-controversy is rejected and a construal order is
deemed appropriate in this case. Despite the previous and ongoing
antitrust litigation between the parties in other courts and
Anchor's admission that the parties have had numerous disputes over the supply of barite ore, Anchor would have this court
believe that there is complete agreement with Smith about the
meaning of Paragraph II.G of the Stipulated Divestiture
Agreement. Anchor's statement that the paragraph "says what it
says and requires no clarification," (Opp. Mem. at 5.), rings
hollow: it is not an open admission that Smith's proposed
interpretation is correct. Given the history of conflict between
Smith and Anchor and the nature of Anchor's statement, the Court
finds it appropriate to issue a construal order.
B. Interpretation of the Modified Final Judgment
"[T]he construction of a consent decree is essentially a matter
of contract law." Citizens For A Better Envnt. v. Gorsuch,
718 F.2d 1117, 1125 (D.C. Cir. 1983); see also United States v.
Microsoft Corp., 147 F.3d 935, 945 (D.C. Cir. 1998). "Under
general contract law, the plain and unambiguous meaning of an
instrument is controlling, and the Court determines the
intentions of the parties from the language used by the parties
to express their agreement." See WMATA v. Mergentine Corp.,
626 F.2d 959, 961 (D.C. Cir. 1980); see Lucas v. U.S. Army
Corps of Eng'rs, 789 F. Supp. 14, 16 (D.D.C. 1992) ("Intent is
construed by an objective standard and evidenced from the words
of the contract itself."). Only if the instrument's language is
ambiguous may Courts turn to other evidence of the parties'
intent. United States v. Western Elec. Co., 894 F.2d 1387, 1394
(D.C. Cir. 1990). Smith asks the Court to construe Paragraph II.G
of the Modified Final Judgment's Stipulated Divestiture Agreement
as follows: first, that the paragraph obliges Smith to supply
"crude barite ore" but not ground barite ore; and second, that
the paragraph obliges Smith to supply crude barite ore but does
not oblige Smith to transport or process that ore. Smith contends, and the Court agrees, that Modified Final
Judgment's language is unambiguous on both these points. The
language supports Smith's first assertion that Paragraph II.G
only concerns crude barite ore. In that paragraph, the word
"crude" always modifies the word "barite." There is no mention
whatsoever of ground barite ore. The language also supports
Smith's second assertion that Paragraph II.G concerns supply and
not transport or processing of crude barite ore. The paragraph
uses the word supply, which Webster's Ninth New Collegiate
Dictionary defines as "to make available for use." "To make
available" does not include the obligation to deliver or process.
Moreover, the paragraph sets forth a pricing scheme for the crude
barite ore based on the ore's country of origin and packaging,
not some delivery or processing method.
Anchor offers no alternative reading of Paragraph II.G. Rather,
Anchor merely protests that the Modified Final Judgment's
Stipulated Divestiture Agreement is not the only source of
Smith's legal obligations to Anchor. Whether this is so is not
relevant to how the Court ought to construe the plain language of
its own consent decree. This Court's construction of the consent
decree does not make impossible the existence of other agreements
between Smith and Anchor.
C. Anchor's Motion to File a Surreply
Still left for discussion is Anchor's motion to file a surreply
in this case. Smith, in its reply brief in support of its motion
for a construal order, makes the point that "[w]hile Smith is not
aware of any contracts, agreements or obligation to supply anchor
with barite other than the supply agreement imposed by the
Modified Final Judgment, it will anxiously await the filing of an
Amended Complaint in the Oklahoma [litigation]." (Reply Br. at
6.). Anchor seizes on this statement and argues that it needs a supplemental memorandum to
introduce two contracts executed in 1996 and "explain the
relevance of these agreements to the issues now pending before
"A surreply may be filed only by leave of Court, and only to
address new matters raised in a reply, to which a party would
otherwise be unable to respond." United States ex rel. Pogue v.
Diabetes Treatment Ctrs. of Am., 238 F. Supp. 2d 270, 276-77
(D.D.C 2002); see also Robinson v. The Detroit News, Inc.,
211 F. Supp. 2d. 101, 112 (D.D.C. 2002) ("The standard for
granting leave to file a surreply is whether the party making the
motion would be unable to contest matters presented to the court
for the first time in the opposing party's reply."). The matter
must be truly new. Lewis v. Rumsfeld, 154 F.Supp.2d 56, 61
(D.D.C. 2001) ("Because this contention does not involve a new
matter but rather an alleged mischaracterization, the court
denies the plaintiff's motion.").
The discussion of agreements separate from the Stipulated
Divestiture Agreement is hardly new to Smith's reply: it began
with Smith's first brief. Smith noted that it has, in the past,
privately contracted with Anchor to sell ground barite ore. (Mot.
for Order at 6.). This is not in dispute. In its opposition
brief, Anchor notes this so-called "admission" by Smith; however,
it never makes mention of specific agreements or explains the
relevance of any private agreement to Smith's motion. (Opp. at
6.). This was Anchor's opportunity to make its case regarding the
separate agreements. That Anchor failed to put forth its best
case in its opposition is not grounds for permitting a surreply.
Smith's proffer, in its reply brief, of unawareness of current
obligations to supply ore to Anchor was made in the context of a
discussion of the Oklahoma litigation, in which Anchor's
complaint references the Stipulated Divestiture Agreement 55
times yet never mentions either of the 1996 agreements.
Anchor "took a litigation gamble," Pogue, 238 F. Supp. 2d at 277,
by not fully addressing the separate agreements in its
opposition brief, and it lost. Anchor's motion for leave to file
a surreply must be denied.
For the foregoing reasons, the Court denies Anchor's motion for
leave to file a surreply and grants Smith's motion for a
construal order. An order consistent with this opinion shall
issue this date. ORDER
Upon consideration of the several motions relating to Smith
International, Inc.'s motion  for an order construing
continuing obligations under the Modified Final Judgment, and
consistent with a Memorandum Opinion issued in this case this
date, it is hereby:
ORDERED that Anchor Drilling Fluids U.S.A., Inc.'s motion 
for leave to file response to Smith International's motion for
order construing is GRANTED.
ORDERED that Anchor Drilling Fluids U.S.A., Inc.'s motion 
for leave to file a surreply is DENIED.
ORDERED that Smith International, Inc.'s motion  for oral
argument is DENIED.
ORDERED that Smith International, Inc.'s motion  for a
construal order is GRANTED.
ORDERED that Paragraph II.G of the Stipulated Divestiture
Agreement of the Modified Final Judgment entered in this case on
September 19, 1996 shall be construed as follows: 1. The term "crude barite ore" shall not include
ground barite ore.
2. The paragraph only obliges Smith International,
Inc. to supply Anchor Drilling Fluids U.S.A., Inc.
crude barite ore in the specified manner; it does not
oblige Smith International to process or deliver said
crude barite ore.