Paul Boynton, chairman, president and CEO, Rayonier Advanced Materials Inc. (File photo)
JACKSONVILLE, US: Rayonier Advanced Materials Inc said it has filed a lawsuit in Georgia state court for a declaratory judgment confirming the meaning of certain language in its supply agreement with its largest customer, Eastman Chemical.
Specifically, the action asks the court to confirm its interpretation of certain provisions of the supply agreement which impact the price and, in some cases, the volume required to be purchased by Eastman. The Supply Agreement was entered into by Rayonier and Eastman effective 1 Jan, 2012 and goes through calendar year 2018. This dispute relates to the 2016 and future contract years and should not impact either price or volume in 2015.
The primary language at issue involves “meet or release” provisions, which allow Eastman to obtain bona fide third party offers that meet the requirements of the supply agreement for similar cellulose specialties products, and would require Rayonier to either meet such price or release the volume. Rayonier strongly believes that the language of the supply agreement as well as past practices of the parties make clear that the volume subject to this meet or release provision is limited to 7,500 metric tonne per year, which is less than 2 percent of its total expected cellulose specialties sales volume to all Rayonier customers in 2015. Rayonier is seeking expedited resolution of this matter with the court.
Eastman filed an action in Tennessee in which it asserts that its entire annual purchase obligation is subject to the aforementioned “meet or release” provision, rather than only 7,500 tonne. In the unlikely event that Eastman were to prevail in this action, Rayonier would have to either match the pricing of the bona fide offers that meet all requirements, thereby retaining the Eastman volumes, or release a portion or all of the volumes should it deem the sale at such prices to be unattractive.
“Pricing negotiations are always spirited debates around a number of factors and threatened or actual litigation is one tool that parties can employ. Eastman’s 4 Aug action required us to take the necessary steps to protect our contractual arrangement,” said Paul Boynton, chairman, president and CEO, Rayonier.
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