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Antitrust Complaint Involves Tree Chemicals

(CN) - A company that makes a cholesterol-fighting drug from pine trees says its raw material supplier plans to cut it off and destroy its multimillion-dollar business, in a federal antitrust complaint in Jacksonville, Fla. Arboris LLC claims that Arizona Chemical Co. and the chemical company's subsidiary, Arizona Arboris, schemed to steal its technology for extracting and purifying phytosterols, which has brought the young company annual sales of $50 million.

Arizona Chemical controls almost half the world's supply of "tall oil pitch" (TOP), a substance generated during "pulping of pine trees," from which phytosterols can be produced.

Arboris is the "world's leading manufacturer and marketer of non-genetically modified phytosterols" - cholesterol-reducing compounds used in pharmaceuticals, foods, supplements and cosmetics, according to the complaint. Sterols also are used in "spreads, juices, bread, milk, [and] yogurt," according to the Arboris Web site.

Arboris is a joint venture in which Arizona Chemicals owns a 10 percent interest, through its wholly owned subsidiary, Arizona-Arboris.

Between 1994 and 1997, Arizona tried to process phytosterols using Swedish technology, but could not reach "competitive quality standards," according to the complaint.

Arboris says that in 2001 a Chilean businessman named Thomas Harting patented a technology to process phytosterols, and sought out Arizona to supply raw materials. But Arizona was not satisfied with a "simple supply agreement," and induced Harting into a joint venture, Arboris says.

The 30-year venture, Arboris LLC, was between Harting's affiliate - Arboris Roots - and Arizona's subsidiary - Arizona-Arboris. It included a 30-year rent-free lease of Arizona's vacant land, which was terminable should the supply agreement end. In exchange, the venture gave Arizona-Arboris 10 percent ownership of Arboris LLC.

Arboris Roots spent $65 million to build state-of-the-art extraction and purification plants in Savannah, Ga., and Newark, Ohio, while Arizona made minimal contributions, according to the complaint.

Arboris contracted with Arizona-Arboris, which subcontracted with Arizona, to be in charge of plant operations, the complaint states.

Arboris claims that Arizona Chemical stood to make an "extraordinary profit" from the exclusive supply agreement.

Though Arboris was successful, capturing 60 percent of the world market for non-genetically modified phytosterols in 2004, the company claims that in 2009 Arizona Chemical refused to renegotiate the supply agreement, which was good for 10 years. Eventually, Arboris says, it realized that Arizona did not intend to renew the TOP supply agreement at all, and that it planned to acquire Arboris' assets through default termination of the lease.

Arboris believes that Arizona wanted to "enter the non-GMO phytosterols market itself, as it had tried unsuccessfully to do for years."

Arboris says that Arizona-Arboris has vetoed its attempts to buy a different facility or diversify its products. Arboris adds that it discovered that Arizona "assigned teams" to study and steal its confidential information and technology for Arizona's benefit after it evicts Arboris from the Savannah plant.

Arboris seeks an injunction and damages for antitrust violations, breach of contract, breach of fiduciary duty, misappropriation of trade secrets, deceptive trade practices and fraud.Its lead counsel is Timothy Volpe with Volpe, Bajalia, Wickes, Rogerson & Wachs

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