Rayonier and Eastman Sue Each Other Over Specialty Cellulose Supply Agreement
Rayonier Advanced Materials has filed a lawsuit against Eastman Chemical in a dispute over their purchase and supply agreement for specialty cellulose products. The action, which calls for a judgement against Eastman, was filed in a court in Georgia, USA, on August 13 and disclosed in an 8-K filing with the Securities and Exchange Commission (SEC).
Specifically, Rayonier is seeking a legal interpretation of certain aspects of the agreement which affect the price and, in some cases, the volume required to be purchased by Eastman. The agreement, effective from January 1, 2012, runs through 2018. The dispute relates to 2016 and future contract years.
The primary language at issue involves the “meet or release” provisions which allow Eastman to obtain bona fide third-party offers that meet the requirements of the supply agreement for similar specialty cellulose products, thus requiring Rayonier to either meet such price or release the volume. Rayonier said it strongly believes that the language of the agreement, as well as past practice by the parties, make clear that the volume subject to this provision is limited to 7,500 t/y which is less than 2% of its total expected specialty cellulose sales to all of Rayonier’s customers in 2015.
Eastman has filed an action in Tennessee in which it asserts that its entire annual purchase obligation is subject to the “meet or release” provision, rather than only 7,500 t/y.
Chairman, president and CEO of Rayonier, Paul Boynton, commented: “Pricing negotiations are always spirited debates around a number of factors and threatened or actual litigation is one tool that parties can employ. Although Rayonier Advanced Materials would have preferred to address any concerns or negotiations around pricing privately, Eastman’s August 4 action required us to take the necessary steps to protect our contractual arrangement.”
He added: “We remain committed to resolving our differences with our largest customer in a constructive manner and continuing our 85 year relationship, which has been mutually beneficial to both parties, for many years to come.”
