Impreglon, Inc. v. Newco Enterprises, Inc.

• Decision Date: 30 March 2007
• Docket Number: Civil Action No. 1:05-CV-2563-RWS.
• Citation: 508 F.Supp.2d 1222
• Parties: IMPREGLON, INC., Plaintiff, v. NEWCO ENTERPRISES, INC., and W. Curt Jarrell, Defendants.
• Court: U.S. District Court — Northern District of Georgia

508 F.Supp.2d 1222

IMPREGLON, INC., Plaintiff, v. NEWCO ENTERPRISES, INC., and W. Curt Jarrell, Defendants.

Civil Action No. 1:05-CV-2563-RWS.

United States District Court, N.D. Georgia, Atlanta Division.

March 30, 2007.

COPYRIGHT MATERIAL OMITTED

James Donald Humphries, III, Stites & Harbison, Atlanta, GA, for Plaintiff.

Jason G. Smith, Office of Jason G. Smith, Sharpsburg, GA, for Defendants.

ORDER

STORY, District Judge.

This case comes before the Court for consideration of (i) Plaintiff's Motion for Summary Judgment as to Liability for Breach of Fiduciary Duty [40]; (ii) Plaintiffs Motion for Summary Judgment on Employment Contract Restrictions on Count V of Its Complaint [41]; (iii) Plaintiffs Motion for Summary Judgment as to Liability for Violation of the Lanham Act and the Georgia Uniform Deceptive Trade Practices Act [42]; and (iv) Defendants' Motions for Summary Judgment [60, 61, 62]. After considering the entire record, the Court enters the following Order.

Background

I. The Parties

Plaintiff Impreglon, Inc. is a Georgia corporation which engages primarily in the business of applying surface coatings to metal and other substances. (Pl.'s Stmt. of Mat. Facts [41-1] ¶¶ 1-2 [hereinafter "PSMF-B"].)¹ Impreglon's business generally consists of receiving products or parts from customers, applying a specified coating or combination of coatings to the surfaces of the parts or products in order to achieve a desired property, such as nonstick, abrasion resistance, or corrosion protection, and then returning the coated parts or products to the customer. (Id.; Pl.'s Stmt. of Mat. Facts [42-2] ¶ 1 [hereinafter "PSMF-C"]; Verified Compl. [1] ¶ 6.) Defendant Newco Enterprises, Inc. ("Newco") is a Georgia corporation which engages primarily in the business of refurbishing and repairing hot melt adhesive application equipment for use in the nonwoven industry.² (PSMF-B ¶¶ 17-18.) Newco was previously a significant customer of Impreglon, however, it now performs coating services and competes with Impreglon in the coating services market. (See id. ¶¶ 4, 20-21, 48.) Defendant W. Curt Jarrell is the former President and CEO of Impreglon, and is currently an employee of Newco, and a member of the "Newco Trust," a three-person management group which makes all business decisions for Newco. (See id. ¶¶ 8, 43.)

II. The Relationship Between Impreglon, Newco, and Jarrell

In March of 1994, Jarrell was hired as the President and CEO of Impreglon for a period of three years. (PSMF-B ¶ 8.) In addition, Jarrell was granted an option to purchase up to a 55% majority ownership interest in Impreglon, which Jarrell did not exercise.³ (Id. ¶ 9.) After serving as Impreglon's President and CEO for approximately three years, Jarrell and Impreglon, on or about February 18, 1997, entered into a new employment agreement (the "1997 Agreement"). Under the terms of the 1997 Agreement, Jarrell was to continue in his capacity as President and CEO until Impreglon's "close of business," or Jarrell's "death" or "total disability" (Id. ¶ 11), but could resign his position at any time after providing sixty days prior written notice. (Jarrell Depo. Ex. 4, 1997 Agreement ¶ 11.) As pertinent to this action, the 1997 Agreement contained a number of restrictive covenants, including (1) a non-compete clause, (2) a non-solicitation clause, and (3) a restriction on soliciting and/or hiring other Impreglon employees to work in a competing enterprise. (PSMF-B ¶ 13.)

In the fall of 1998, Impreglon, along with all of the companies licensed to sell coating services under the Impreglon trade name worldwide, adopted a uniform, alpha-numeric system to identify each of the various coatings offered by the companies. In the same year, Newco, in conjunction with its primary business, began to offer coating services to its customers. Lacking the capacity to perform the coating services itself, Newco outsourced all of its coating needs to Impreglon.⁴ (PSMF-C ¶ 13.) During this period, Newco was authorized to use the Impreglon coating numbers in its communications with its customers to refer to the various coatings available from Impreglon through Newco. Under this arrangement, Newco would prepare promotional coating samples for customers by applying an adhesive label with Newco's name, address, contact information, and the appropriate Impreglon coating number to coating samples provided by Impreglon for that purpose. (Id. ¶¶ 14, 17.) In addition, Newco would provide customers with technical data sheets relating to the various coatings available. These data sheets were provided by Impreglon, and Newco would then substitute its own name, address, and contact information, for that of Impreglon. (Id. ¶ 18.) Newco provided both the coating samples and the technical data sheets bearing its own contact information with Impreglon's full knowledge and consent.

From 1998 to 2005, Newco continued to outsource its coating needs to Impreglon in this manner. (PSFM-B ¶ 25.) During this period, Jarrell served as Newco's primary contact with Impreglon, he attended trade shows with and for Newco, and answered technical coating questions from both Newco and its customers. (Id. ¶ 23.)

By late 2004, while still employed as the President and CEO of Impreglon, Jarrell began considering resignation, and in November or December of 2004, engaged in numerous discussions with Newco regarding the possibility of joining Newco as its president and a shareholder. (Id. ¶¶ 26-27.) For reasons not in the record, this did not at first come to fruition, and Jarrell initially elected instead to start his own coating business, Fusion Surface Engineering, Inc. ("FSE"). (See id. ¶¶ 29-31.) In January 2005, Jarrell entered into negotiations with Newco to lease a Newco building for purposes of housing his FSE's business operations. (Id. ¶ 32.) In addition, Jarrell requested, and received, a written commitment from Newco to send its coating business, which it had previously outsourced to Impreglon, to FSE. (Id. ¶ 33.) By letter dated February 2, 2005,. Newco agreed to use FSE for its coating operations, and provided Jarrell with specific estimates, based on its previous dealings with Impreglon, of the value of the coating work that FSE could expect to receive. (Id.)

In February 2005, plans changed again. Rather than outsourcing its coating services to Jarrell's new company, it was decided that Jarrell would go to work directly for Newco, and Newco developed a two-year business plan which shows Newco providing coating services in-house and not through a separate, Jarrell-owned entity. (Id. ¶ 34.) Shortly thereafter, Newco's president informed at least one Newco employee that Jarrell was coming to Newco as a "partner," but that the employee should "keep it quiet." (Id.) In February or early March 2005, and in preparation for Jarrell's arrival, Newco began to reconfigure its manufacturing facilities to perform coating services, devoting 50% of the reconfigured space to coating services and installing new equipment including coating booths, a large oven, compressors, and a spray gun. (Id. ¶¶ 37-39.) Some of this equipment, including a plasma coating booth, a wet coating booth, and a blast booth, were purchased by Jarrell during the period of his employment with Impreglon. (See id. ¶ 39.) In the end, while still an officer of Impreglon, Jarrell would either invest in, on loan, Newco $125,000 worth of coating equipment in return for a 35% ownership interest in Newco. (Id. ¶¶ 41-42.)

On or about March 15, 2005, Jarrell sent a letter to Henning Claassen, stating his intent to resign his position as President and CEO of Impreglon. (See id. ¶ 14.) Mr. Claassen accepted Jarrell's resignation, expressly referencing the provision of the 1997 Agreement which requires Jarrell to provide 60 days advance notice of his resignation.⁵ (Id.) At, the request of Mr. Claassen, however, Jarrell agreed to remain with Impreglon beyond the required 60 day period and continued to serve in his capacity as President and a CEO of Impreglon until June 10, 2005. (See id. ¶¶ 14-15.) On July 5, 2005, Jarrell would officially start work with Newco.

In June 2005, Newco stopped outsourcing the entirety of its coating work to Impreglon, and began providing some polymer and thermal coating services itself. (PSMF-C ¶ 19.) These were the same types of services which were previously provided by Impreglon. (Id. ¶ 21.) Newco lacked the capacity to perform certain coating work for its customers, however, and thus continued to outsource some portion of its coating work to Impreglon. This relationship continued until August 2005, when Impreglon informed Newco that it would no longer provide Newco with such services. (Defs.' Stmt. of Mat. Facts [62] ¶¶ 19, 21 [hereinafter "DSMF-C"].) Although Newco still lacks the capacity to perform certain coating services, it now competes with Impreglon in the marketplace. (PSFM-C ¶ 29; DSMF-C ¶ 29.)

In October 2005, Plaintiff initiated this action alleging, inter alia, that Jarrell and Newco's actions violate the Lanham act, 15 U.S.C. § 1125(a), the Georgia Unfair Trade Practices Act, O.C.G.A. § 10-1-370 et seq., the Georgia Trade Secrets Act of 1990, O.C.G.A. § 10-1-761(2) et seq., and that Jarrell individually breached both the 1997 Agreement and his fiduciary obligations to Impreglon. Plaintiff then moved for preliminary injunctive relief which this Court, by order entered October 13, 2005 granted in part and denied in part. (See Order of Oct. 13, 2005[8].) Discovery has been concluded, and both Plaintiff and Defendants now move for summary judgment. The Court turns to resolve these motions.

Discussion

I. Preliminary Matters

Before turning to the merits of Plaintiff's various motions for summary judgment, one preliminary matter warrants attention. Under the Local Rules of this Court, as well as the Scheduling Order governing this case, all motions for summary judgment must be filed not later than 20...