JSW Steel (USA) Inc. v. Nucor Corp.

586 F.Supp.3d 585

JSW STEEL (USA) INC., et al., Plaintiffs,

v.NUCOR CORP., et al., Defendants.

Civil Action No. 4:21-CV-01842

United States District Court, S.D. Texas, Houston Division.

Signed February 17, 2022

Michael Lee Calhoon, Christopher Wilson, JoAnna Adkisson, Joseph Ostoyich, Julie B. Rubenstein, Baker Botts LLP, Washington, DC, for Plaintiffs.

Christopher Mohr Odell, Arnold & Porter, Houston, TX, James L. Cooper, Jason C. Ewart, Kolya D. Glick, Monique N. Boyce, Robert J. Katerberg, Arnold Port LLP, Washington, DC, Adam L. Hudes, Katherine E. Monks, Stephen M. Medlock, Mayer Brown LLP, Washington, DC, Michael Patrick Lennon, Jr., Mayer Brown LLP, James A. Reeder, Jr., Elizabeth Weaver Scofield, Jones Day, Houston, TX, Jordan Gleeson, Thomas D. York, Jones Day, Dallas, TX, for Defendants.

MEMORANDUM & ORDER

Keith P. Ellison, United States District Judge

On January 27, 2022, the Court held a hearing on Defendants' Motions to Dismiss. Docs. 46, 47. The Court took the motions under advisement and allowed the parties to file supplemental briefing if desired. Plaintiff filed a supplemental memorandum. Doc. 83. Having considered the parties' briefing and oral arguments, the Court now GRANTS the Motions to Dismiss for the reasons set forth below.

I. BACKGROUND

A. Alleged Facts

1. JSW

Plaintiffs JSW Steel (USA) Inc. and JSW Steel USA Ohio, Inc. (collectively, "JSW") brought this lawsuit. JSW is a small U.S. manufacturer of finished steel products that owns and operates facilities in Baytown, Texas, and Mingo Junction, Ohio. Compl. ¶ 2. It is part of a steel conglomerate based in India.

This case involves domestically manufactured steel slab—the critical feedstock that JSW and other manufacturers use in the production of their finished products. Id. ¶ 44, 53. JSW has certain chemical and metallurgical requirements for the slab it purchases and uses to make high-quality finished steel pipe, plate, and coil products. Id. ¶¶ 2, 43. JSW sells the pipe, plate, and coil products for use in critical infrastructure projects, such as natural gas and oil transmission pipelines, shipbuilding, transmission pole towers, wind towers, railroad tank cars, and other heavy equipment industries in the United States. Id.

From 2015 until early 2019, JSW enjoyed steadily increasing sales. Id. ¶ 60. As a result of this growth, in early 2018, JSW announced and began implementing two significant expansion projects in Baytown and Mingo Junction. First, JSW publicly announced a $500 million investment project at its Baytown facility to build the most technologically advanced and eco-friendly electric arc furnace ("EAF), slab caster, and plate mill in the world. Id. ¶ 55–59, 61, 78. The project was designed to transform JSW's Baytown facility into the only melt and manufacture ("M&M") plate mill in the United States with a contiguous pipe mill capable of supplying large diameter welded steel pipe for oil and gas transmission. Id. ¶ 61. JSW broke ground on this project in Fall 2018; it had entered into construction and supply contracts and obtained a New Source Review Air Permit from the U.S. Environmental Protection Agency. Id. ¶ 62.

Second, JSW announced plans and took steps to ramp up and modernize its Mingo Junction, Ohio, facility, to make hot-rolled coil bands. Id. ¶¶ 66, 77. JSW expected significant revenue growth from these projects. Id. ¶ 75.

2. Defendants

Defendant Nucor is a Delaware corporation with its principal place of business in North Carolina. It is a leading domestic producer of sheet steel, plate steel, structural steel, bar steel, and steel coils. It operates five sheet mills that produce flat-rolled steel for automotive, appliance, construction, pipe and tube, and other industrial and consumer applications. Id. ¶ 34. Nucor currently maintains about 31% market share of domestic steelmaking capacity, making it the second largest manufacturer in the U.S. Id. ¶ 49.

Defendant U.S. Steel is a Delaware corporation with its principal place of business in Pennsylvania. It is a fully integrated steel producer with operations in the U.S., Canada, and Europe, where it manufactures semi-finished steel slab that it uses to produce finished steel products, including sheet steel, steel plate, and steel coils. Id. ¶ 35. It is the third largest steel producer in the U.S. and maintains about 19% market share of domestic steelmaking capacity. Id. ¶ 51.

Defendant AK Steel is a Delaware corporation with its principal place of business in Ohio. It is an integrated producer of flat-rolled carbon, stainless, and electrical steel products, primarily for the automotive, infrastructure and manufacturing, and distributor and converter markets. Around March 13, 2020, AK Steel was acquired by Cleveland-Cliffs Inc. It became a direct, wholly owned subsidiary of Cleveland-Cliffs, operating under the name AK Steel Holding Corporation. Id. ¶ 36.

Defendant Cleveland-Cliffs is an Ohio corporation with its principal place of business in Ohio. Cleveland-Cliffs is a fully integrated producer of custom-made iron ore pellets; flat-rolled carbon, stainless, electrical, plate, tinplate and long steel products; and carbon and stainless-steel tubing. Id. ¶ 37. With the acquisitions of AK Steel and ArcelorMittal (a major producer not named in this lawsuit and not alleged to have joined in any conspiracy), Cleveland-Cliffs holds approximately 34% market share of domestic steelmaking capacity, making it the largest steel producer in the United States. Id. ¶ 52.

Defendants U.S. Steel, AK Steel, and Cleveland-Cliffs are purportedly domestic manufacturers of steel slab in the size and chemistry that is the feedstock for JSW end products. Nucor is also a domestic manufacturer of slab, though Nucor uses that slab as part of its continuous manufacturing process and cannot offload any to customers like JSW. Id. ¶ 37.

3. U.S. Steel Tariff Program and Meetings Involving Defendants

JSW does not itself produce steel slab; rather, it must buy slab from other producers to make its finished products. Id. ¶ 3. Historically, JSW has imported steel slabs from India, Mexico, and Brazil to support its U.S. operations. Id. ¶¶ 81, 94. Tariffs could challenge JSW's ability to benefit from imported slab.

In April 2017, the U.S. Department of Commerce ("Commerce") began investigating the effects of steel imports on U.S. national security pursuant to Section 232 of the Trade Expansion Act, 19 U.S.C. § 1862. U.S. Dep't of Commerce, Notice Request for Public Comments and Public Hearing on Section 232 National Security Investigation of Imports of Steel , at 1 (Apr. 21, 2017). The investigation concluded that a robust American steel industry is an essential component both of domestic economic viability and national security. U.S. Dep't of Commerce, The Effect of Imports of Steel on the National Security , at 1-2, 13, 23 (Jan. 11, 2018) (appendix omitted).¹ The Commerce Department further determined that the importation of cheap foreign steel "adversely impact[s] the economic welfare of the [U.S. steel] industry." Id. at 27.

Accordingly, on March 1, 2018, then-President Trump announced that the U.S. would impose a 25% tariff on most steel imports. Compl. ¶ 79; see also 15 C.F.R. Pt. 705, Supp. 1. "Most of the domestic steel industry"—including JSW—professed "uniform support of the tariffs." Compl. ¶ 83.

Around this time, Defendants (and other domestic steel producers) met with the President, id. ¶ 81, the House of Representatives, id. ¶¶ 83, 88, and officials in the Department of Commerce, id. ¶¶ 90, 91. Plaintiffs suggest that these meetings were at least partly for the purpose of organizing the alleged conspiracy, while Defendants maintain that these meetings were solely to discuss advocacy efforts related to the tariff. For example, on September 6, 2018, representatives from Nucor and U.S. Steel met after Nucor's representative stated: "We spoke with Nazak Nikakhtar [Department of Commerce] a few weeks ago about possible changes to the steel Section 232 exclusion process. Last Friday she suggested that we also meet with Earl [likely Earl Comstock, Department of Commerce] to discuss this issue. Ideally, the meeting would be with both Nucor and U.S. Steel because both companies have been working together. " Compl. ¶ 91 (emphasis in original). There is a factual dispute whether the companies were "working together" on issues beyond the tariff on imported steel. On Plaintiffs' information and belief, Defendants have also participated in trade association meetings from 2018 to the present. Id. ¶ 92.

As part of the tariff program, the Department of Commerce created a process to exclude from the tariffs any steel product that "could not be sourced domestically." Id. ¶ 82. Under this process, an exclusion request may be granted if the Department of Commerce's Bureau of Industry and Security ("BIS") determines that the product to be imported is not domestically available in sufficient quantity and quality. 15 C.F.R. Pt. 705, Supp. 1 (c)(6).

Domestic steel producers can object to a tariff exclusion request if they can demonstrate that the product to be imported is available domestically. Id. ¶ 82; see also 15 C.F.R. Pt. 705, Supp. 1 (d)(4). These regulations do not require objectors to demonstrate that the steel product available domestically "be identical," but only that it "be equivalent as a substitute product." 15 C.F.R. Pt. 705, Supp. 1 ¶ (c)(6)(ii). Objections to an exclusion request must be submitted within a 30-day public comment period. Id. at ¶ (d)(3). From there, both the importer and objector(s) are afforded a final opportunity to respond through a rebuttal process. Id. at ¶¶ (f)(4), (g)(4). Then, BIS alone determines whether to grant or deny the request. Id. at ¶ (c)(6).

If an exclusion request is denied, but it later comes to light that the product was not, in fact, available domestically, then the importer may submit a new exclusion request that refers to the original request. Id. at ¶¶ (c)(6)(i), (ii).

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