WILMINGTON, Del.—A trial pitting materials firm A. Schulman Inc. against Citadel Plastic Holdings L.L.C. began April 16 in Delaware Chancery Court in Wilmington.
A spokesperson for Fairlawn, Ohio-based Schulman confirmed that the trial is underway but had no further details. The firm is seeking damages related to its $800 million acquisition of Citadel in early 2015. Issues related to the Citadel acquisition—including questions about material quality—led to financial problems at Schulman.
Schulman filed the suit in June 2016. The firm is seeking unspecified damages from former Citadel owners including Huntsman Gay Capital Partners and Charlesbank, as well as from several former Citadel executives, including Michael Huff and Matthew McDonald.
Most of Schulman's accusations center around Lucent Polymers, an Evansville, Ind.-based compounding firm that Citadel bought in late 2013. According to the original court filing, Schulman "never would have purchased, much less paid $800 million for Citadel had it know that [Lucent] was engaging in fraudulent business practices that … substantially reduced [Citadel's] profitability and growth prospects."
Schulman also has accused Citadel/Lucent of falsifying certificates of analysis given to customers that exaggerated flame retardant properties and other characteristics of the compounds that Lucent was making.
"Knowledge of this pervasive fraudulent scheme…went all the way to the top," Schulman officials said in the filing. "Lucent and Citadel officers and directors knew of and condoned these wrongful practices."
Judge J. Travis Laster is hearing the case. Schulman is being represented by Wilmington lawyer Paul Lockwood. Legal information on Citadel was unavailable on the court's web site.
In February, Schulman agreed to be acquired by LyondellBasell Industries for $2.25 billion.
Separately, Schulman officials in January said that federal officials are undertaking a criminal investigation related to the lawsuit. In a Jan. 9 earnings call, Schulman President and CEO Joseph Gingo said the FBI has identified Schulman as a possible crime victim.
A November court ruling said that several former Citadel employees in October were served with subpoenas requiring them to produce documents as part of the FBI investigation. Those former employees included executives Huff, McDonald, Kevin Andrews, Jason Jimerson and Mario Sandoval.
Schulman posted sales of almost $2.5 billion for fiscal 2017. The firm ranks as a leading compounder and concentrates maker in both North America and Europe and as one of Europe's leading resin distributors.