Aswsignment
CASE BRIEF 16.2
Lucini Italia Co. v. Grappolini
2003 WL 1989605 (N.D. Ill. 2003)
FACTS: Mr. Frigo hired Mr. Grappolini as a consultant for his Lucini company, a company that developed high-end olive oils for sale in the United States. Mr. Grappolini was to negotiate a supply contract with Vegetal for its olive oil, one that was necessary for use in creating a flavored olive oil Frigo was developing (the LEO project).
With the LEO product launch approaching, and no copy of the alleged Vegetal supply contract available, Mr. Frigo had Lucini's lawyer in Italy contact Vegetal directly for a copy. The lawyer learned that Vegetal had a supply contract, but the contract was with Mr. Grappolini's company and that it was not transferable to Lucini. Mr. Frigo then confronted the officers of Vegetal they acknowledged that they had negotiated with Mr. Grappolini for his company, not for Lucini and were not aware of Lucini's needs or Mr. Grappolini's representation of Lucini. The officers at Vegetal said that Grappolini had been a "bad boy" in negotiating the contract for himself. Vegetal agreed to supply Lucini with olive oil in the future, but could not deliver it in time for the launch of Lucini's new line. The soonest it could deliver would be after the next harvest, a time that meant the marketing and sales plans of Lucini for its new product had been wasted.
Mr. Frigo and Lucini filed suit against Mr. Grappolini and his company (defendants) for breach of fiduciary duty.
ISSUE: Did Mr. Grappolini breach his fiduciary duty?
DECISION: As agents, Defendants owed Lucini general duties of good faith, loyalty, and trust. In addition, Defendants owed Lucini "full disclosure of all relevant facts relating to the transaction or affecting the subject matter of the agency".
Defendants were Lucini's agents and owed Lucini a fiduciary duty to advance Lucini's interests, not their own. When Defendants obtained an exclusive supply agreement with Vegetal for the Grappolini Company instead of for Lucini, they were disloyal and breached their fiduciary duties. Lucini suffered substantial damages as a result of this breach.
As a proximate result of Defendants' breach of their fiduciary duties, Lucini suffered lost profit damages of at least $4.17 million from selling its grocery line of LEO products from 2000 through 2003. The Court will award Lucini its lost profits of $4,170,000, together with its $800,000 of development costs for LEO project. Defendants engaged in willful and malicious misappropriation as evidenced by their use of the information for directly competitive purposes and their efforts to hide the misappropriation and, accordingly, the Court will award $1,000,000 in exemplary damages. Such an award is necessary to discourage Defendants from engaging in such conduct in the future.
Questions
1. Explain how Mr. Grappolini breached his fiduciary duty.
2. What lessons can you learn about contracts, suppliers, and product launches from the case?
3. Evaluate the ethics of Mr. Grappolini's conduct. Why did Vegetal's officers refer to Mr. Grappolini as a "bad boy"?
CASE BRIEF 16.3
Garon Foods, Inc. v. Montieth
2013 WL 3338292 (S.D. Ill. 2013)
FACTS: Sarah Montieth was an employee of Garon Foods from November 2011, until she voluntarily resigned in February 2013. Garon sells peppers to cheese manufacturers for use in making pepper jack cheese. Garon acts as a distributor for peppers it obtains from a supplier that Garon relabels and distributes to its pepper jack cheese manufacturing customers under Garon's name. During her time at Garon, she had access to a computer program listing the names of Garon's customers, and she was assigned to manage the accounts of a small number of customers (around five at any one time).
Prior to starting employment, Sarah signed a "Garon Trade Secrets Confidentiality Agreement" in which she agreed to hold Garon's trade secrets confidential and to refrain from using them for anything other than Garon's benefit. Under the Agreement, trade secrets included customer lists, customer products, customer pricing, data, designs, financial records, formula, packaging, procedures, processes, suppliers, vendors, and other confidential information. Garon further protected some of this information on a computer system with individual passwords and by hiding it on its computer server.
At the time of her resignation, Sarah signed another document in which she acknowledged the Agreement's non-disclosure provisions. Garon never asked Sarah to sign a covenant not to compete with Garon.
During Sarah's employment with Garon, she sent an e-mail with some of the foregoing confidential information to her personal e-mail account. She did this for the purpose of preparing for a meeting to address a customer complaint that had arisen while others at Garon were away on vacation. On one occasion, Sarah also sent a purchase order containing confidential information to a trucking company to facilitate an urgent transportation request. When Sarah resigned, she was escorted from Garon's property and took no documents with her. She did retain in her memory the names of purchasing agents of certain Garon customers and general knowledge of the industry, such as "ballpark" pricing arrangements. Any specific pricing details Sarah retained in her memory are likely to be obsolete within a year or less due to the fluctuation of product prices.
After Sarah's resignation, she began working as an independent contractor for the Supplier of peppers to Garon. This was the Supplier's first attempt to market its product directly to cheese manufacturers.
No credible evidence shows Sarah gave the Supplier any of Garon's confidential information or trade secrets. However, Garon alleges Sarah breached the Agreement when she began marketing the Supplier's products directly to pepper jack cheese manufacturers, which included Garon's customers. Sarah sent mass e-mails to the purchasing agents of the companies on a list of pepper jack cheese manufacturers. She had not obtained the manufacturer list from Garon, but derived it on her own through internet searches. She had remembered some of the purchasing agents' names from her work at Garon, but had obtained others, along with contact information, through telephone calls to the manufacturers. She did not specifically target any of Garon's customers with her e-mail solicitations, but she did not avoid them either. However, some of the mass e-mails contained references from which the manufacturer could easily conclude that the Supplier was Garon's source of the products Garon sold under its own name. For example, one mass e-mail offered to sell the Supplier's product to manufacturers using standard packaging methods (pails, drums and totes) "at a significant cost savings and with shorter lead times" than the manufacturer could get through a distributor. The e-mail further contained a specification sheet for a product that this customer had purchased from Garon.
Despite receiving a cease and desist letter from Garon's counsel, Sarah continues to solicit business for the Supplier. Sarah has not brought any new customers to the Supplier since her marketing efforts began, but Garon has lost one long-time customer who generated more than $200,000 of business a year. If the Supplier is able to draw customers away from Garon, Garon's reputation in the industry would suffer and it would be nearly impossible to get its customers back. Additionally, since Sarah began working for the Supplier, the Supplier has increased the product prices it charges Garon, which Garon has been forced to pass along to its customers.
Garon filed suit alleging Sarah breached the Agreement by revealing confidential information and violated the Illinois Trade Secrets Act ("ITSA"), by misappropriating Garon's trade secrets. Garon asked the Court to issue a preliminary injunction barring Sarah from using or disclosing Garon's confidential information or trade secrets, ordering her to return all confidential information or trade secrets within her possession, and ordering her to disclose everyone to whom she provided Garon's confidential information or trade secrets and all the customers she has contacted since leaving Garon.
ISSUES: Did Sarah breach her agreement not to disclose? Did she reveal trade secrets? Was Garon entitled to an injunction?
DECISION: The court found that Sarah had violated the agreement through certain of her actions and that she had revealed some information that constituted trade secrets. However, an agreement to not disclose is still a covenant not to compete and balancing in required between Garon's rights and Sarah's ability to earn a living.
The court therefore issues a tailored injunction that spelled out what Sarah could and could not do for the next eight months.
Sarah is enjoined from soliciting business for the Supplier from any cheese manufacturer whose account she was assigned to manage during the twelve months before she stopped working for Garon. This injunction shall last for eight months following entry of this preliminary injunction. This preliminary injunction does not prevent Sarah from servicing any of these cheese manufacturers who independently become customers of the Supplier by means other than her solicitations.
Sarah is enjoined from soliciting business for the Supplier from any cheese manufacturer she knows is or was a Garon customer by mentioning or using any specific information in the solicitation about their past purchasing needs or sales terms. This restriction includes mentioning in the solicitation the specifications of the products she knows from her experience at Garon were sold to that cheese manufacturer by Garon.
This preliminary injunction does not prevent Sarah from responding to a cheese manufacturer's request for products that it has purchased from Garon so long as the request for those products is initiated by the cheese manufacturer.
Sarah is enjoined from referring in her solicitations to (1) Garon or (2) any other information from which a cheese manufacturer is likely to draw the conclusion that the Supplier provides Garon with the products Garon sells under its name. This restriction includes, but is not limited to, mentioning in the solicitation the specific weights of products in conjunction with the method of packaging that were sold exclusively by Garon (e.g., 43-pound pails) and inviting the cheese manufacturer to compare the quality audit documentation of Garon and the Supplier.
This preliminary injunction does not prohibit Sarah from responding to a cheese manufacturer's request for products packaged in the specific weights and methods sold by Garon or for a list of the packaging weights and methods available from the Supplier, so long as the request is initiated by the cheese manufacturer.
Questions
1. What kind of information does Sarah have that could harm Garon?
2. What type of business was Sarah attempting to create?
3. What restrictions does the court impose?
CASE BRIEF 16.4
Lange v. National Biscuit Company
211 N.W.2d 783 (Minn. 1973)
FACTS: Ronnell Lynch was a cookie salesman for Nabisco. Jerome Lange was the manager of a small grocery story on Lynch's route. Nabisco had received complaints about Lynch being overly aggressive in taking shelf space. On May 1, 1969, while Lynch was delivering merchandise to Lange's store, Lynch and Lange became involved in an argument and Lynch assaulted Lange and threw merchandise around the store. Lange sued Nabisco for his injuries.
DECISION BELOW: The jury found for Lange even though Lynch's acts were outside the scope of employment because Nabisco was negligent in hiring and retaining Lynch. The judge granted Nabisco a judgment NOV and Lange appealed.
ISSUE ON APPEAL: Was Nabisco responsible for Lynch's conduct when it was not part of his scope of employment?
DECISION: Yes. Generally, masters are not held liable for intentional torts unless the master requested it of the servant. But here, there was an implied request through Nabisco's inaction with respect to complaints about Lynch.
Questions
1. What previous indications did Nabisco have that Mr. Lynch might cause some problems?
2. What test does the court give for determining scope of employment?
3. What is the "motivation test," and does this court accept or reject it?
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