By Jonathan Stempel
(Reuters) - A federal appeals court on Friday threw out a lawsuit brought by purchasers of potash who accused seven major producers of running a global conspiracy to raise the price of the mineral, which is used mainly in fertilizer.
Reversing a lower court order, the 7th Circuit Court of Appeals in Chicago said the purchasers failed to show a plausible "direct, substantial and reasonably foreseeable" link between the alleged foreign anti-competitive conduct and a 600 percent surge in U.S. potash prices from 2003 to 2008.
The appeals court directed the dismissal of claims alleging violations of the Sherman Act, a U.S. antitrust law.
Defendants included Canada's Agrium Inc
The plaintiffs included Minn-Chem Inc and Kraft Chemical Co, as well as several individuals.
Potash is a key crop nutrient used by farmers worldwide and is also used to make animal feed supplements, glass and soaps. The worldwide market for potash may total $25 billion to $30 billion in 2011, according to industry experts.
"We were very pleased by the decision, which calls for a complete dismissal," said Stephen Shapiro, a partner at Mayer Brown in Chicago who argued the case for the potash companies. "The court decided that the law requires dismissal because the complaint failed to allege any substantial or direct connection between the alleged conduct and the United States."
Bruce Simon, a partner at Pearson, Simon, Warshaw & Penny in San Francisco who argued the case for the purchasers, said his clients are evaluating their options.
The purchasers accused the potash companies of conspiring since 2003 to artificially restrict output and boost prices, citing "parallel" business conduct in Brazil, China and India.
They said the conspiracy contributed to the 600 percent surge in prices, following years of relative stability.
The defendants countered that U.S. courts did not have jurisdiction in an alleged offshore pricing conspiracy, and that any similarities in their conduct were coincidental.
U.S. District Judge Ruben Castillo in November 2009 allowed the case to continue, saying the allegation of a conspiracy was plausible. He then certified his order for immediate appeal.
Writing for the 7th Circuit, Judge Diane Sykes said the lawsuit offered "very little of substance" to show a link between alleged overseas price-fixing and U.S. potash prices.
"Contrary to what the district court seemed to think, it is not enough that the defendants are engaged in the U.S. import market," Sykes wrote.
"The complaint does not allege that the defendants agreed to worldwide production quotas or a global cartel price, nor are there allegations that the defendants ever imposed a price or supply quota on the American potash market specifically."
Demand for potash is expected to total between 55 million and 60 million tons in 2011, and the average price is now just below $500 a ton, industry experts said.
Judge Daniel Manion joined Sykes' opinion. A third judge who had been on their panel, Terence Evans, died last month.
The case is Minn-Chem Inc et al v. Agrium Inc et al, 7th U.S. Circuit Court of Appeals, No. 10-1712.
(Reporting by Jonathan Stempel in New York; Additional reporting by Euan Rocha in Toronto; Editing by Gerald E. McCormick, John Wallace, Matthew Lewis and Steve Orlofsky)