For the past 19 years, two massive corporations have waged a costly legal battle, centred on a tiny hamlet in central Alberta, that has resulted in record-setting judgments amounting to billions of dollars in damages.
And it’s not over yet.
The dispute between Dow Chemical Canada and Nova Chemicals Corporation concerns the operation of a jointly-owned ethylene production facility in Joffre, 20 kilometres northeast of Red Deer.
The complex case has numerous issues at stake, but each company accuses the other of breach of contract.
Among other claims, Dow says Nova effectively stole some of its ethylene, while Nova claims Dow violated their agreement by directly buying ethane from third parties in the region.
While the legal saga continues, a court this year awarded $3.56 billion in damages to Dow.
“Sometimes people behave badly. And sometimes, when they’re caught behaving badly, they won’t stop,” said Blair Yorke-Slader, a lawyer at Bennett Jones who has worked on the case for Dow since 2010.
“This happens to be one that involves some very big companies and some very big dollars but, fundamentally, it’s a contract case.”
Nova has filed nearly a dozen appeals in the case, and is pursuing a stay of judgment pending those appeals.
The saga begins in 1997, when Nova entered into an agreement with Union Carbide to build and operate an ethane cracker in Joffre. Ethane is a component of natural gas that, until the 1960s, was simply burned as a fuel.
However, when ethane is separated and then “cracked” or converted into ethylene, it becomes a valuable component in the production of plastics, antifreeze and other chemical products.
Nova already operated two ethylene plants in Joffre and this joint venture would be its third, known as E3.
At the time it opened, it was the world’s largest ethylene production facility of its kind.
Then, a plot twist: Union Carbide was purchased by Dow in 2001, the same year E3 began commercial operations. Suddenly, Nova was locked in an 80-year joint venture with its major competitor.
“Possibly that’s the source of later difficulty,” said Yorke-Slader.
“You don’t get that very often, where two competitors in essentially a two-competitor industry are partners trying to run a plant together.”
This created an awkward situation.
Under the contract, Nova was responsible for procuring the ethane for the E3 plant and was required to share information about those purchases with the plant’s co-owner.
While this wasn’t a problem with Union Carbide, Nova balked at having to share sensitive pricing information with Dow, a major competitor.
In 2006, Dow sued Nova, stating that as operator of the E3 facility, Nova was intentionally running it below its maximum capacity — which had an outsized impact on Dow’s bottom line because Nova still had two other ethylene crackers operating in Joffre.
Dow also alleged that Nova had diverted some of the ethylene produced at E3 that was rightfully Dow’s.
Nova countersued.
Among its arguments was the claim that Dow’s purchase of ethane from other regional suppliers violated the contract.
Dow argued that those parts of the contract were null and void because they violated the Competition Act — which wasn’t an issue when Nova signed the contract with Union Carbide, but became one once Dow, as the only other large purchaser of ethane in the regional market, took it over.
It took until 2015 for a seven month-long trial to begin in a Calgary courtroom.
The plant, meanwhile, continued running, and because Nova denied any wrongdoing, it continued operating E3 as it had before. For the purposes of arguing at trial, the parties agreed to limit the scope to a time frame of 2001 to 2012.
In 2018, Court of Queen’s Bench Justice Barbara Romaine ruled in favour of Dow and against Nova’s countersuit.
Describing Nova’s conduct as “wilful misconduct and gross negligence,” she found that Dow “proved on a balance of probabilities that Nova has breached the joint venture agreements both as operator and as co-owner and has converted some of the ethane that Dow was entitled to from E3.”
There was no ethane shortage as Nova claimed, said Romaine, and Nova failed to maximize production at E3 as required.
Dow was awarded $1.43 billion. But the saga was far from over.
The two companies kept the courts busy for years with appeals, new arguments and other legal wrangling. (Unrelated to E3, Dow also sued Nova over a patent dispute. That case went all the way to the Supreme Court of Canada in 2022, with the court ruling in Dow’s favour.)
Only this year was the original trial judge able to rule on damages for the full period from the plant’s opening in 2001 to the original decision in 2018. Romaine was often critical of the arguments advanced by Nova, at various times calling them “odd,” “incorrect,” and “somewhat tortured.”
In total, she awarded Dow $3.56 billion in damages.
“We continue to be disappointed with the trial court’s decisions,” a Nova spokesperson said in an email.
“Nova Chemicals upholds the highest standards of integrity, and we remain committed to responsible operations while pursuing available options to address the current outcome.”
Romaine’s final written decision in the case, which dealt with costs (Dow claimed more than $82 million in external legal fees), was released in August shortly after her long-awaited retirement. In it, she noted the exceptional duration of the litigation.
“Literally millions of pages of records were produced, more than 50 individuals were questioned, thousands of interrogatories and undertakings were requested and answered, and there were more than two dozen case management applications and other appearances,” she wrote.
“Hard copies of exhibits occupy a large retiring room in the Courthouse.”
Aside from Nova’s ongoing appeals in this case, Dow filed an additional lawsuit in 2020 seeking damages after the 2018 decision.
Remarkably, the two companies are still business partners — the E3 contract still has 50 years left.
Yorke-Slader says the case is the longest of his career. But he believes endless litigation is a poor business strategy.
“There has to be a ‘coming to Jesus’ [moment] and a better approach, because otherwise you’re going to keep a lot of lawyers busy for the next half century, and that’s not a very good business solution,” he said.
“A 50-year marriage is extraordinary. An 80-year marriage is Jimmy Carter and nobody else.”
