Adcor Indus., Inc. v. Bevcorp, LLC

• Decision Date: 10 November 2005
• Docket Number: No. 1:03 CV 1901.,1:03 CV 1901.
• Citation: 411 F.Supp.2d 778
• Parties: ADCOR INDUS., INC., Plaintiff, v. BEVCORP, LLC, et al., Defendants.
• Court: U.S. District Court — Northern District of Ohio

Page 778

411 F.Supp.2d 778

ADCOR INDUS., INC., Plaintiff, v. BEVCORP, LLC, et al., Defendants.

No. 1:03 CV 1901.

United States District Court, N.D. Ohio, Eastern Division.

November 10, 2005.

COPYRIGHT MATERIAL OMITTED

Michael J. Collins, Thomas & Libowitz, P.A, Baltimore, MD, Tracey L. Turnbull,

Hugh E. McKay, Porter, Wright, Morris & Arthur, Cleveland, OH, for Plaintiff.

Carole S. Rendon, Philip S. Kushner, Michael R. Hamed, Rachael L. Israel, Kushner & Rendon, Edward P. Simms, Ronald H. Isroff, Ulmer & Berne, John S. Pyle, Gerald S. Gold, Gold & Pyle, Cleveland, OH, for Defendants.

MEMORANDUM OF OPINION AND ORDER

POLSTER, District Judge.

This matter is before the Court on the following remaining claims in this case:¹ Count I is a claim for theft or conversion of trade secrets in violation of O.R.C. §§ 1333.61 to 1333.69. Count IV is a claim for breach of a consent decree, and Count V is a claim for conspiracy to breach the consent decree.

Count I is before the Court on Bevcorp, LLC and the Connelly Defendants' Motion for Summary Judgment (the "Summary Judgment Motion") (ECF No. 135). The Motion was filed by Defendants Michael and Victoria Connelly, Miconvi Industries, Inc. and Miconvi Properties, LLC, and Bevcorp, LLC (collectively, "the Connelly Defendants"). The Connelly Defendants ask the Court to dismiss as untimely Plaintiff Adcor Industries, Inc.'s ("Adcor") claim against them for misappropriation of trade secrets. Because the Court concludes that the misappropriation claim accrued more than four years before Adcor filed its initial complaint, the Court GRANTS the Summary Judgment Motion for the reasons set forth in Section II below. Furthermore, although Defendants Haag and Romp did not file a summary judgment motion with respect to Count I, the Court is nonetheless entering judgment in their favor and against Adcor for the reasons set forth in Section II(D). Thus, Count I is DISMISSED WITH PREJUDICE IN ITS ENTIRETY.

Counts IV and V were severed and tried to the Court as a motion for contempt in hearings held on April 27, 2005 and June 22, 2005. The Court has heard the evidence, reviewed the parties' numerous filings and concludes, for the reasons set forth in Section III below, that Adcor's motion for contempt must be GRANTED with respect to Defendants Haag and Romp. See also briefing schedule infra, at 35. The Court is deferring ruling on this motion with respect to Defendants Michael and Victoria Connelly, Miconvi Industries, Inc. and Miconvi Properties, LLC, and Bevcorp, LLC, pending discovery. The Court is also deferring its ruling with respect to the conspiracy claim presented in Count V pending discovery.

I.

This case arises from an Agreed Judgment Entry and Order entered on March 4, 1988 by Judge Alvin I. Krenzler in a case captioned Crown Cork & Seal Co, Inc v. Brau Mfg, Inc, Haag & Romp Design Engineering Consultants, Baron Haag and Chester Romp, Case No. C87-3300. See Am. Compl., Ex. A ("Consent Decree"). Baron Haag and Chester Romp, defendants in the instant case, were defendants in the Crown Cork & Seal case, along with the companies they owned, Brau Manufacturing and Haag & Romp Design Engineering Consultants (collectively, "the Brau Defendants").

In the Consent Decree, the Brau Defendants admitted that they knowingly and intentionally solicited, procured and paid employees of Crown Cork & Seal (hereafter, "Crown") and their family members $300,000 to obtain its trade secrets and other proprietary information beginning as early as 1964 and continuing through 1987. Consent Decree ¶¶ 1-6. They admitted that they used Crown drawings to manufacture replacement parts for equipment originally manufactured by Crown, and that they used Crown drawings to create their own drawings for the same parts. Id. ¶ 3. They admitted that they used both company and personal funds to misappropriate the trade secrets, and that the converted information enabled them to compete unfairly with Crown. Id.

The Consent Decree allowed the Brau Defendants to "remain in the business of repairing and reconditioning fillers and other beverage equipment, including equipment manufactured by Crown". Consent Decree ¶ 10. However, the Decree absolutely prohibited them from manufacturing or obtaining "other than from Crown, any Crown parts for this purpose," and "from using in any manner whatsoever in connection with any such repairing or reconditioning business or at any time in the future any of the trade secrets or confidential, proprietary information and knowledge obtained from Crown." Id. The Brau Defendants agreed "to inform their employees, customers, the trade and the public ... that they have forever withdrawn from the business of manufacturing Crown parts, and that to the extent such parts will be required in their repair or reconditioning work, [they] will use only genuine Crown parts purchased directly from Crown." Id. ¶ 11(d). The parties agreed that the term "Crown parts" should be given the "broadest possible construction," id. ¶ 9, and that the Decree should be construed "expansively" in Crown's favor and against the Brau Defendants, id. ¶ 16.

The Consent Decree required the Brau Defendants to return to Crown, within ten days of the Decree's issuance, all Crown drawings and other proprietary materials and their inventories of finished and unfinished Crown products, and to pay to Crown the sum of $2,225,000.00. Consent Decree ¶ 11. The Decree forever barred the Brau Defendants from possessing, reproducing or replicating any documents referring, relating or pertaining to the manufacture of Crown parts, and it required them to immediately turn over to Crown any such documents coming into their possession in the future. Id. ¶ 12.

The Consent Decree gave Crown broad policing powers. The Brau Defendants agreed "that Crown may police [their] compliance with the terms of this agreement for so long as they or any of them remain in business, by any and all means which Crown deems necessary or appropriate" including review of "all ... documents of any sort whatsoever, maintained by the defendants, ... in connection with any activity or undertaking engaged in by them" and "visits and inspections, both announced and unannounced ..." Consent Decree ¶¶ 13(a), (b). The Consent Decree also gave Crown the right, "through counsel or other representatives, to question any person or persons formerly, presently or hereafter employed by the defendants, or any of them or any of defendant's agents or representatives, in connection with any business activity ..." Id. ¶ 13(c).

By its own terms, the Consent Decree applied not only to the Brau Defendants but to "each and every of their respective successors, assigns, affiliates, agents, representatives, heirs, administrators, executors, family members, and any person dealing directly or indirectly through them or in concert with them." Consent Decree, ¶ 7. Moreover, the Brau Defendants agreed that, "[i]n the event of any sale or assignment of either the stock or assets of Brau or Haag & Romp, or either of them, this prohibition shall continue against any acquiring or successor entity." Id. ¶ 9.

In 1991, Defendants Michael and Victoria Connelly, respectively a lead mechanic and executive secretary for Brau Manufacturing ("Brau"), incorporated a company under the name Bevcorp Industries, Inc. ("Bevcorp Industries" or "Bevcorp") while still working at Brau. Bevcorp Industries was created to service, refurbish and sell replacement parts for, among other things, Crown beverage fillers. See ECF No. 99 at 2. The Connellys continued to work for Brau until 1992, when they left Brau to devote their full time to Bevcorp Industries.

In 1997, Simplimatic, Inc. purchased Crown's Machinery Division and the resulting company became known as Crown Simplimatic, Inc. ("Crown Simplimatic").

In 1998, Crown Simplimatic sued Adcor (the plaintiff in this case and a Crown competitor at the time), claiming that Adcor had misappropriated Crown drawings relating to a valve body which, Crown Simplimatic claimed, could not be made without Crown drawings.² The parties eventually settled that case and, in December 2000, Adcor acquired the assets of the Crown entities, including the Crown drawings, out of bankruptcy.

Meanwhile, in April 2000, the Connellys formed Bevcorp Properties, LLC ("Bevcorp Properties") to purchase and hold real estate and, in May 2000, bought the real estate and certain equipment of Brau. Shortly thereafter, at the Brau Defendants' request, the Connellys moved everything they didn't purchase to a Willoughby, Ohio storage facility rented by Haag and Romp.

In November 2002, a company called Enprotech Corporation purchased the assets of Bevcorp Industries and formed an entity called Bevcorp, LLC. The Connellys became officers of Bevcorp, LLC upon its formation. Bevcorp Industries changed its name to Miconvi Industries, Inc. ("Miconvi Industries"), and Bevcorp Properties changed its name to Miconvi Properties, LLC ("Miconvi Properties"). Miconvi Properties leases to Bevcorp, LLC the real estate where the Bevcorp facility is now located and which was once owned and operated by Brau

On September 9, 2003, Adcor filed a four-count complaint against Defendants Bevcorp, LLC, the Connellys, Miconvi Industries and Miconvi Properties, and Baron Haag and Chester Romp. ECF No. 1 ("Compl."). On December 12, 2003, Adcor filed an amended complaint alleging five claims. ECF No. 55 ("Am.Compl."). The Court subsequently dismissed with prejudice Counts II and III of the Amended Complaint, ECF No. 57, leaving Counts I (trade secret misappropriation), IV (breach of consent decree) and V. (conspiracy to breach the consent decree) pending. The contempt claims (Counts IV and V) were severed and tried to the Court on April 27, 2005, at the conclusion of which the Court directed the parties to file post-hearing briefs. The transcript for the April 27^th hearing is located at ECF No. 138 ("Init'l...