General Elec. Co. v. Lyon

Decision Date21 July 1995
Docket NumberCiv. A. No. 94-30242-MAP.
Citation894 F. Supp. 544
PartiesGENERAL ELECTRIC COMPANY, Plaintiff, v. William J. LYON, Blair Todd Anthony, Neils C. Kristensen, Jr., BBMC, Inc. and Lansen Mold Co., Inc., Defendants.
CourtU.S. District Court — District of Massachusetts

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John J. Curtin, Diane M. Kottmyer, Bingham, Dana & Gould, Boston, MA, Leonard Cohen, Cain, Hibbard, Myers & Cook, Pittsfield, MA, for General Electric Company.

Christopher R. O'Hara, J. Owen Todd, Todd & Weld, Boston, MA, for William J. Lyon, Blair Todd Anthony, BBMC, Inc.

Alice E. Zaft, Cooley, Shrair, Alpert, Labovitz & Dambrov, Springfield, MA, for Neils C. Kristensen, Jr., Lansen Mold Co., Inc.

MEMORANDUM REGARDING PLAINTIFF'S MOTIONS TO DISMISS DEFENDANTS' COUNTERCLAIM AND PLAINTIFF'S AND DEFENDANTS' MOTIONS TO AMEND COUNTER-CLAIMS

PONSOR, District Judge.

I. INTRODUCTION

The defendants are two small businesses who, together with their principals, have been sued by General Electric Company ("G.E.") for violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962(c) and (d), for unfair trade practices in violation of Mass. Gen.L. ch. 93A, and for common law deceit, breach of fiduciary obligations, civil conspiracy and conversion. In response, the defendants have filed counterclaims against GE, alleging abuse of process, tortious interference with advantageous business relations, breach of contract and violations of RICO and Mass.Gen.L. ch. 93A.

The defendants can be divided into two groups. The first, the "BBMC" group, consists of defendants William J. Lyon and Blair T. Anthony and their joint venture, BBMC, Inc. Until August, 1994, Lyon and Anthony were employees of GE's Plastic Division in Pittsfield, Massachusetts. The second, the "Lansen" group, consists of Neils C. Kristensen, Jr. and his company, Lansen Mold Co., Inc., which was both a customer of GE and a manufacturer of products for BBMC.

In essence, GE alleges that all defendants conspired to defraud GE of revenues. GE asserts that it fired Anthony and Lyon because, in express violation of company policy, they formed BBMC while they were employees of GE, stole materials from GE to use in the manufacture of products, sold these products back to GE, purchased promotional materials for their business with GE funds, and fraudulently entered into business relationships with valued GE customers. GE claims that the Lansen defendants were parties to BBMC's scheme to defraud GE.

In their counterclaims, defendants assert that Anthony and Lyon voluntarily resigned from GE after receiving assurances that no repercussions would follow from their involvement in their outside business. Defendants allege that after Lyon and Anthony resigned, GE Plastics engaged in a campaign to cause (1) harm to Lyon and Anthony's business reputation and to BBMC by coercing third parties to cease business relations with BBMC and (2) harm to Lansen by refusing to deliver essential raw materials to Lansen and by instructing authorized GE distributors that they were not to sell raw materials to Lansen.

The BBMC and Lansen defendants both allege tortious interference with advantageous business relations and violations of ch. 93A. The BBMC defendants further allege abuse of process. The Lansen defendants further allege breach of contract and violations of the RICO statute by GE. In addition, both sets of defendants have moved to amend their counterclaims in order to provide supplementary facts. Finally, the Lansen defendants have moved to amend their counterclaim to include a claim for abuse of process.

Before the court are GE's motions to dismiss defendants' counterclaims and the defendants' motions to amend. For the reasons set forth below, all motions will be allowed in part.

II. FED.R.CIV.P. 12(b)(6)

The burden is heavy on a party moving to dismiss. The appropriate inquiry is whether the non-mover is entitled to offer evidence in support of its claims. Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). In deciding a motion brought pursuant to Fed.R.Civ.P. 12(b)(6), a court must look only to the allegations and, "if under any theory they are sufficient to state a cause of action in accordance with the law, a motion to dismiss ... must be denied." Knight v. Mills, 836 F.2d 659, 664 (1st Cir.1987), citing Melo-Tone Vending Inc. v. United States, 666 F.2d 687, 688 (1st Cir.1981)); accord Cuddy v. Boston, 765 F.Supp. 775, 776 (D.Mass.1991). For purposes of these motions, the court must accept as true all the factual allegations set forth in the defendants' counterclaims and draw all reasonable inferences in their favor. Bergeson v. Franchi, 783 F.Supp. 713 (D.Mass.1992), citing Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 52 (1st Cir. 1990); Dartmouth Review v. Dartmouth College, 889 F.2d 13, 16 (1st Cir.1989).

III. FACTUAL BACKGROUND
A. Lyon, Anthony, and BBMC

The counterclaim of these defendants asserts the following facts. Until August 1994, defendants William J. Lyon and Blair T. Anthony were employees of GE's Plastics Division in Pittsfield, Massachusetts. Lyon and Anthony were involved in the marketing and promotion of a unique GE product, Heavy VALOX resin. Their responsibilities included developing commercial applications for this GE product. GE routinely supported companies that were interested in developing products made from Heavy VALOX by providing advertising and marketing support, tooling and no-charge shipments of various resins. By utilizing this intensive company support, Anthony and Lyon were successful in establishing a market for GE's unique product.

In 1992, while employed at GE, Anthony and Lyon formed a company of their own, BBMC, Inc., to serve as a supplier and customer of GE. Lyon and Anthony formed BBMC as a means of developing specific commercial applications of Heavy VALOX that had previously seemed unlikely to GE management. In order to produce certain items, BBMC entered into a business agreement with Kristensen and his company, Lansen Molding. As part of its business arrangement with BBMC, Lansen agreed to mold a variety of products that BBMC would market.

The venture proved successful; BBMC's forays into dinnerware and shower "surrounds," for example, represented successful new market opportunities for the use of Heavy VALOX. In August, 1994, Anthony and Lyon were approached by GE's Director of Human Resources, Mark Chini, and queried about their involvement with BBMC, apparently because it might conflict with GE's personnel policy. According to the BBMC defendants, they were told that their involvement with BBMC was only a minor infraction of company policy. Anthony and Lyon were assured that, if they resigned and cooperated with the internal investigation, there would be no further ramifications and no civil or criminal proceedings would be brought against them.

Despite these assurances, once Anthony and Lyon resigned, GE personnel began to spread rumors that they had been fired. GE also hired a management consulting firm, the Fairfax Group, to investigate Lyon and Anthony's role in BBMC. According to the BBMC defendants, Robert Hildner of the Fairfax Group falsely represented himself as a prospective customer to Anthony and Lyon. He later revealed that he was hired by GE and threatened that GE would make life difficult for defendants if they did not cooperate.

GE also pressured Formica Corporation to suspend its business relationship with BBMC. Formica had ordered 10,000 "Nuvel" brand colored chip samples made from Heavy VALOX from BBMC and had arranged with Lansen to manufacture these samples. In addition to its work on color chips, BBMC was also engaged by Formica to produce and promote bath and shower surround kits. Formica reconfirmed its intent to work with BBMC on this product even after Lyon and Anthony had left GE's employ. But, according to Anthony and Lyon, GE pressured Formica to stop working with BBMC on this project too. The BBMC defendants claim that in September 1994, as a result of GE's improper efforts, Formica completely terminated its business relationship with BBMC. In addition, after Anthony and Lyon resigned, GE withheld shipments of Heavy VALOX from Lansen Molding, BBMC's subcontractor. This made it impossible for Lansen to meet BBMC's production deadlines.

B. Kristensen and Lansen

The following facts may be gleaned from the Lansen defendants' counterclaims.

Lansen Molding, a small family-owned business, had tested and manufactured products made from GE resins for over ten years. Lansen had a longstanding business relationship with GE, serving as one of the moldmakers to which GE recommended customers interested in using Heavy VALOX. Typically, GE would recommend to certain of its customers that they use Lansen to manufacture the tooling needed to produce the customer's product. Lansen would then order Heavy VALOX and other plastic resins for use in production, billing GE for the cost of constructing the tooling. By establishing a business relationship with GE's customers, Lansen helped to create a market for Heavy VALOX. Lansen's billing arrangement with GE and its plastics unit, Polymerland, permitted payment for raw materials thirty days after receipt.

In keeping with this arrangement, Anthony approached Lansen and arranged for it to produce coffee mugs of Heavy VALOX. Lansen produced tooling for these mugs, at a cost of over $70,000. Lansen, in keeping with prior practice, assumed that the cost of the tooling would be paid for by GE, as had other tools ordered by Anthony in the past. Only after the tooling was in production was Lansen informed that it was actually being built for BBMC directly. BBMC also engaged Lansen to build tooling for color chips for Formica. Subsequently, Formica engaged Lansen, through BBMC, to begin the production of shower surrounds made from Heavy VALOX.

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