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d?~6 6ó~ UNTED STATES OF AMERICA oc-I ' FEDERAL TRADE COMMISSION 5"1t.7~1 OFFICE OF ADMINISTRATIVE LAW JUGES 

) 

In the Matter of ) 

) 

Polypore International, Inc., ) Docket No. 9327 

a corporation, ) (Public Version)
 

)
 

Respondent. )
 

) 

) 

INTERVENOR HOLLINGSWORTH & VOSE COMPANY'S
 

BRIEF ON REMEDIES
 

AFFECTING ITS CONTRACTUAL RIGHTS 

Counsel for Hollngsworth & Vose Company: 

Kathryn K. Conde 

Jonathan D. Persky 

NUTTER MCCLENNEN & FISH LLP 

155 Seaport Boulevard 

World Trade Center West 

Boston, MA 02210 

Tel: (617) 439-2420 

Fax: (617) 310-9420 

E-mail: kconde(lnutter.com 

jpersky(lnutter. com 

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i. INTRODUCTION
 

The Complaint issued against Polypore International, Inc. ("Polypore") in this matter 

alleges that Polypore's acquisition of Microporous Holding Corporation is an ilegal merger 

under Clayton Act, Section 7 and Section 5 of the Federal Trade Commission Act and that it 

also constitutes an unlawful merger to monopoly. The Complaint alleges further that Polypore 

engaged in a pattern of conduct - the merger being just one aspect - of thwarting competition
 

and monopolizing various battery separator markets. As part of this scheme, the government 

contends that Polypore's subsidiary, Daramic, solidified an unlawful monopolization of several 

polyethylene ("PE") battery separator markets by inducing Intervenor, Hollngsworth & Vose 

Company ("H&V"), to enter into a restrictive covenant contained in a Cross Agency 

Agreement, "in order to prevent H&V from entering the PE separator market." (Compl.' 

47.). The essence of the government's claim against Daramic on the Cross Agency Agreement 

is that Daramic did not have a legitimate procompetitive purpose that could justify the restraint 

on H&V's competitive activities with respect to PE battery separators. (CC Post-Trial Brief at 

65-68.). It is the non-competition provision concerning the PE battery business - not the 

overarching cross agency arrangement - that the government contends is an "unfair method of 

competition." Notably, the Complaint did not name H&V as a Respondent and did not allege 

that H& V engaged in unlawful conduct with respect to l 

l 

H& V submits this brief pursuant to the Order on Motion to Leave to Intervene by N onParty Hollingswort & Vose Company (the "Intervention Order") to address the propriety of 

the relief requested by Complaint Counsel to the extent the remedy improperly deprives H& V 

of its property rights under the Cross Agency Agreement. Complaint Counsel proposes to 

remedy Polypore's alleged unfair method of competition with respect to the restriction on PE 

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battery separator competition by requiring Polypore to cease and desist from enforcing or 

implementing and to nullfy both the non-competition restrictions relating to PE battery 

separators and the l L Fundamental 

principles of due process and limitations on the remedial authority of the Federal Trade 

Commission prohibit an order nullfying the contractual rights of H& V which have not been 

litigated in this matter. 

II. CROSS AGENCY AGREEMENT AND CLAIM AGAINST POL YPORE
 

In March 2001, Daramic and H&V entered the Cross Agency Agreement. DaramIc 

makes PE battery separators for flooded lead acid batteries, while H&V makes absorptive glass 

mat ("AGM") battery separators for valve regulated lead acid ("VRLA") batteries. PE 

separators cannot be used in VRLA batteries, and AGM battery separators cannot be used in 

flooded batteries. (H&V FOF '2.) The Agreement provided that l 

_l (H&V FOF , 3.)
 

l 

(H&V FOF "4-5.) H&V engineers frequently participate in sales calls and assist customers 

in resolving manufacturing problems. (H&V FOF " 4- 5.) Since the cross-agency 

relationship would l 

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(H&V FOF , 6.) Section 4(b) provided that l 

L Section 4(a) provided that l 

(H&V FOF "7-8.) 

Complaint Counsel alleges that Daramic did not have a proper procompetitive purpose 

to enter the Cross Agency Agreement and that its sole purpose was to solidify its unlawful 

monopolization of several PE battery separator markets. Complaint Counsel does not contend 

that H& V and Daramic were competitors, but that H& V was a potential competitor of Daramic 

in the PE battery separator business.l Specifically, Complaint Counsel has alleged with respect 

to Daramic's lack of a legitimate procompetitive purpose that: 

. "Daramic's principal purpose in contracting with H&V was to keep H&V out of
 

the PE separator market." (CC Pre-Trial Br. at 32) (emphasis added)). 

. "(T)he evidence establishes that Daramic induced H & V to agree not to compete
 

in several markets - markets that have long been dominated by Daramic." (CC 

Post-Trial Br. at 67 (emphasis added)). 

. Upon learning that H& V was exploring the possibility of entering the PE
 

business, "(Un order to block this competitive threat, Daramic approached H& V 

and proposed an 'allance." (Id. at 63 (emphasis added). 

Without a proper purpose relating to the expansion of PE battery sales, the government 

contends that the restraint on H& V competing in PE battery separators was an unlawful 

i H& V takes issue with the proposition that H& V had any plans to begin making or selling PE battery 

separators, as well as many other of Complaint Counsel's anegations. For example, H&V does not concede that 

Daramic's motives were improper or that the non-compete in Section 4(b) was not a reaoonable ancilary restraint. 

However, those issues are outside of the scope of H&V's in1ervention. 

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restraint. (CC Post-Trial Br. at 67-68.) This tribunal has not adjudicated whether l_
 

L Moreover, in the context of H&V's response to third-party 

discovery requests from the government, H&V was informed that it was not being targeted in 

this case, that its conduct was not at issue and that it was not considered the "bad actor" with 

respect to the Cross Agency Agreement. 

Complaint Counsel's proposed remedy with respect to the Cross Agency Agreement 

extends beyond the claim actually litigated in this case - namely, whether the restriction on 

competition in PE battery separators was a reasonable ancilary restraint. In seeking relief, 

Complaint Counsel fails to distinguish between the restraints on competition in l_
 

L Complaint Counsel proposes that Respondent be required to do as follows: 

1. Within fifteen (15) days after the date this Order becomes final:
 

(a) modif and amend the H& V Agreement in writing to terminate and declare 

null and void, and (b) cease and desist from, directly or indirectly, or through 

any corporate or other device, implementing or enforcing, the covenant not to 

compete set forth in Section 4 of the H& V Agreement, and all related terms and 

definitions, as that covenant applies to Nort America and to actual and potential 

customers within North America. 

2. Within thirty (30) days after the date this Order becomes final,
 

fie with the Commission the written amendment to the H& V Agreement 

("Amendment") that complies with the requirements of Paragraph VLA.1(sicj . 

(CC Proposed Order VIlLA, at 26-27 (emphases added)). 

The Proposed Order would not only require Polypore to nullfy the entirety of Section 4 

by written amendment but would also, within 15 days, require that Polypore not "implement" 

Section 4. In other words, Polypore would be ordered to cease and desist from complying 

L in Section 4(a). 

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If entered, the proposed remedy would necessarily and immediately effect H&V's 

contract rights arising under Section 4(a).2 During the life of 
 the Cross Agency Agreement, 

l 

FOF "911.) Daramic representatives have worked closely with H&V representatives in 

developing and maintaining these customer relationships and goodwil. (H&V FOF " 5,9.) 

l 

L (H&V FOF , 11.) 

H&V's valuable and valid contract rights would be negated by the proposed remedy. 

III. THE PROPOSED RELIEF VOIDING H&V'S CONTRACTUAL RIGHTS
 

VIOLATES PROCEDURAL DUE PROCESS 

A. The Commssion May Not Adjudicate the Rights of a Non-Party 

It is black-letter law that a tribunal may not adjudicate the rights of a non-party. 

Richards v. Jefferson County, Alabama, 517 U.S. 793, 798 (1996) ("In Anglo-American 

jurisprudence. . . one is not bound by a judgment. . . in a litigation in which he is not 

designated as a party or to which he has not been made a party by service of process. "); Zenith 

Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 110 (1969) (similar); Hansberry v. 

Lee, 311 U.S. 32, 40 (1940) (similar); Lohr v. Conseco, Inc., Civ. No. 07-374, 2008 U.S. 

Dist. LEXIS 102344, at *15 (M.D.N.C. 2008) ("(J)udicial action that attempts to enforce a 

2 H& V submitted its proposed Findings of Fact relating to its right umer the contract in compliance with the 

Intervention Order. H&V cited record evidence to which it had public access or which itself possessed. The 

evidence cited is by no means a complete record concerning H&V's rights or concerning the purpose, necessity, 

effect or validity of the restraints contained in the Cross Agency Agreement since H& V did not have rights of 

discovery or presentation of evidence in this matter and does not have access to the complete record, which is 

largely in camera. 

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judgment against an absent party runs afoul of the due process requirements of the Fifth and 

Fourteenth Amendments. "). Without adequate notice and a meaningful opportnity to be 

heard, a party cannot be deprived of a constitutionally protected property interest. 

B. The Government Did not Provide Notice to H&V of its Proposed Nullfication 

of H&V's Contract Rights and H&V was Without a Meaningful Opportnity to 

be Heard. 

H& V's rights under its contract with Daramic constitute a legally protected property 

interest. E.g., Lynch v. United States, 292 U.S. 571, 579 (1934). As such, the Due Process 

Clause requires that H& V be provided adequate notice that its property interest is to be 

affected and a meaningful opportnity to be heard. In re Kellogg Co., Dkt No. 8883, 1978 

FTC LEXIS 280, at *11-*12 (June 9, 1978); see Mathews v. Eldridge, 424 U.S. 319, 333 

(1976). In order to be adequate, notice must describe "the nature and scope of the 

contemplated inquiry." Murphy Oil Corp. v. Fed. Power. Comm'n, 431 F.2d 805,813 (8th 

Cir. 1970) (emphasis added); Shell Oil Co. v. Fed. Power Comm'n, 334 F.2d 1002, 1012 (3d 

Cir. 1964). Such notice must suffciently identify of the allegations against a party. Soule 

Glass & Glazing Co. v. NLRB, 652 F.2d 1055, 1074 (1st Cir. 1981) ("Failure to clearly define 

the issues and advise (a litigant) charged with a violation of the specific complaint he must 

meet and provide a full hearing on the issue presented is to deny due process of law. "). 

Applying the Supreme Court's balancing test set forth in Mathews v. Eldridge,3 meaningful 

opportuty to be heard in this setting must mean the full rights of a party: an opportunity to 

submit evidence, object to evidence and to cross-examine. See, e.g., Murphy Oil Corp, 431 

3 Due process generally requires consideration of three distinct factors. First, the private 

interest that wil be affected by the official action; second, the risk of an erroneous deprivation 

of such interest through the procedures used, and the probable value, if any, of additional or 

substitute procedural safeguards; and finally, the Governmts interest, including the function 

involved and the fiscal and administrative burdens that the additional or substitute procedural 

requirement would entail. 

Matthews v. Eldridge, 424 U.S. 319, 335 (1976). 

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F.2d at 813 ("(P)arties to a proceeding before an administrative agency are entitled to . . . an 

opportunity to be heard and present evidence. . . . A departure from (this) minimal 

requirement() is a denial of 
 procedural due process."); Doe v. U.S. Civ. Servo Comm'n, 483 F. 

Supp. 539, 579 (S.D.N.Y. 1980) ("The right to cross-examine witnesses applies to 

administrative proceedings where an interest protected by the due process clause is at stake. "). 

In this case, Complaint Counsel did not provide H&V with notice that its contractual 

rights were at stake. The Complaint did not state a claim with respect to the l 

L H& V was not a named party and throughout discovery in this 

matter it was informed by Complaint Counsel that it was not being targeted, that its motive was 

not at issue in the case and that H& V was not considered the "bad actor." H& V was without 

any of the discovery or trial rights of a party. Even today the record of the evidence submitted 

on the Cross Agency Agreement is largely in camera. Documents and testimony from 

Polypore relating to the Cross Agency Agreement are not reviewable by H& V. Much of the 

briefing on the claim is also redacted. H&V never offered evidence with respect to the 

legitimate purpose of the Agreement l L never cross-examined 

key witnesses from Polypore or put on full testimony of its own witnesses relating to the valid 

purpose of the Agreement and the reasonable necessity of the restrictions on competition ll
 

L The validity of the l 

_l were not at issue. It is violative of concepts of fundamental fairness for the
 

government to purport to have adjudicated H&V's contract rights under these circumstances. 

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l 

iv. THE PROPOSED NULIFICATION OF H&V'S CONTRACT
 

RIGHTS is BEYOND TH COMMISSION'S REMEDIAL AUTORITY 

Remedies imposed by the Commission must bear a "reasonable relation to the unlawful 

practices found to exist." FTC v. Natl Lead Co., 352 U.S. 419, 428 (1957); In re Ky. 

Household Goods Carriers Ass'n, 139 FTC 404,406 (2004) (Chappell, A.L.J.). Furthermore, 

the Commssion's "orders should go no further than is reasonably necessary to correct the evil 

and preserve the rights of competitors and public." FTC v. Royal Miling Co., 288 U.S. 212, 

217 (1933). 

Complaint Counsel has overreached in its request for a remedy. The remedy must fit 

the claim. The claim that was tried was the legality of the non-competition restrictions 

relating to PE battery separators. Specifically the issues for proof as identified by the parties 

included: (1) whether there was a legitimate purpose relating to PE battery separators; (2) 

whether the PE restriction was reasonably necessary to advance a legitimate procompetitive 

purpose; and (3) whether there was there any anticompetitive effect on markets involving PE 

battery separators. The validity of the non-competition restrictions contained in Section 4(a) 

L were not tested. Any remedy necessarily must be limited to 

the provisions of Section 4(b) l
 l. Requiring Respondent to
 

"modify and amend the H& V Agreement in writing to declare null and void . . . the covenant 

not to compete set forth in Section 4 of the Agreement" is not properly tailored to redress the 

alleged wrongdoing by Daramic. A reasonably related and complete remedy is available in the 

event that this tribunal finds against Daramic on the validity of the PE battery separator noncompete. The relief requested by Complaint Counsel may be modified so that it is limited to 

Section 4(b) and wil not, as such, affect or determine H&V's contract rights. 

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V. CONCLUSION
 

For the foregoing reasons, the Court should decline to adopt section VIII of Complaint 

Counsel's Proposed Order, or, in the alternative, modify paragraph VIlLA. 1 of 
 the Proposed 

Order to strike the words "Section 4 of the H&V Agreement" and insert in their place "Section 

4(b) of the H& V Agreement." 

Dated: September 30,2009 Respectfully submitted, 

HOLLINGSWORTH & VOSE COMPANY 

By its attorneys, 

¡2.h- D ~ .Kthryn K. Conde
 

/ Jonathan D. Persky
 

Nutter McClennen & Fish LLP 

155 Seaport Boulevard 

World Trade Center West 

Boston, MA 02210 

Tel: (617) 439-2420 

Fax: (617) 310-9420 

E-mail: kconde(lnutter.com 

jpersky(lnutter. com 

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CERTTFTCA TE OF SERVTCE
 

I hereby certify that on September 30, 2009, I filed via overnight delivery and 

electronic mail delivery an original and two copies of the foregoing Intervenor Hollngsworth 

& Vose Company's Brief On Remedies Affecting Its Contractual Rights (Public Version) and 

that the electronic copy is a true and correct copy of the paper original and that a paper copy 

with an original signature is being fied with: 

Donald S. Clark, Secretary 

Office of the Secretary 

Federal Trade Commission 

600 Pennsylvania Avenue, NW, Rm. H-135 

Washington, DC 20580 

secretary~c. gov
 

I hereby certify that on September 30, 2009, I filed via overnight delivery and 

electronic mail delivery two copies of the foregoing Intervenor Hollingsworth & V ose 

Company's Brief On Remedies Affecting Its Contractual Rights (Public Version) with: 

The Honorable D. Michael Chappell
 

Administrative Law Judge 

Federal Trade Commission 

600 Pennsylvania Avenue, NW 

Washington, DC 20580 

oalj~c. gov
 

I hereby certify that on September 30, 2009, I caused to be served via electronic 

delivery and first-class mail delivery a copy of the foregoing Intervenor Hollingsworth & V ose 

Company's Brief On Remedies Affecting Its Contractual Rights (Public Version) on: 

Wiliam L. Rickard, Jr., Esq. J. Robert Robertson, Esq. 

Eric D . Welsh, Esq. Steven Dah, Esq. 

Parker, Poe, Adams & Bernstein, LLP Bureau of Competition 

401 South Tryon Street, Suite 3000 Federal Trade Commission 

Charlotte, North Carolina 28202 600 Pennsylvania Avenue, NW 

willamrickard(lparkerpoe. com Washington, DC 20580 

ericwelsh(jparkerpoe. com rrobertson~c. gov 

sdahm~c. gov
 

L~ j) I( rathan D. Persky
 

1863347.1 

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