Hexagon Packaging v. Manny Gutterman & Associates
| Decision Date | 29 August 2000 |
| Docket Number | No. 96 C 4356.,96 C 4356. |
| Citation | 120 F.Supp.2d 712 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | HEXAGON PACKAGING CORPORATION, an Illinois Corporation, Plaintiff, v. MANNY GUTTERMAN & ASSOCIATES, INC., of itself and d/b/a M. Gutterman & Associates, Inc./Jelmar; Jelmar, an Illinois partnership; Jamie Industries, an Illinois corporation; Arthur Gutterman, individually; Blidco Incorporated; Betty Day Company, Inc.; Louis C. Day, Jr. and Margaret Renfroe, as personal representatives of the Estate of Betty Day; and Joseph Ruth, individually, Defendants. |
Harold C. Wheeler, Kevin Jason O'Brien, Louis Joseph Aurichio, Harry Joshua Nelson, Randi L. Ellias, Butler, Rubin, Saltarelli & Boyd, Chicago, IL, for plaintiff.
Stephen A. Cohen, Gilbert W. Gordon, Spencer J. Marks, William V. Saracco, Marks, Marks, & Kaplan, Chicago, IL, for Manny Gutterman, Jelmar, Jamie Industries, Inc., Arthur Gutterman, defendants.
John Lawrence Conlon, Paul Joseph Gaynor, Schwartz, Cooper, Greenberg & Krauss, Chicago, IL, for Blidco Inc., Louis Day, defendants.
Eugene Frederick Frideman, Gail Tuler Friedman, Friedman & Friedman, Ltd., Chicago, IL, Stuart H. Wolf, Arlington Heights, IL, for Joseph Ruth, defendant.
Cory A. Johnson, Michael T. Hannafan & Associates, Ltd., Chicago, IL, for Margaret Renfroe, defendant.
Michael T. Hannafan, Micheal T. Hannafan & Assoc., Ltd., Chicago, IL, for Carlos Montejo, defendant.
Before the court are two motions for summary judgment. One has been presented by Manny Gutterman & Associates, Inc., in its own name and doing business as M. Gutterman & Associates, Inc./Jelmar; Jelmar; Jamie Industries, Inc.; and Arthur Gutterman ("Gutterman"), individually (collectively, the "Gutterman defendants"). The second motion was filed by defendant Joseph Ruth ("Ruth").
The Gutterman defendants and Ruth have adopted each other's motions. Blidco Incorporated, Betty Day Company, Inc., the Estate of Betty Day, Louis C. Day, Jr. and Margaret Renfroe, as personal representatives of the Estate of Betty Day (the "Day Defendants"), have adopted both motions for summary judgment.
The parties dispute almost every fact in this case and spin wildly different tales. The facts below are as set forth by Hexagon. The facts that are not disputed by the Gutterman defendants are specifically noted. See Spolnik v. Guardian Life Insurance Co., 94 F.Supp.2d 998, 1000 (S.D.Ind.2000) ().
In 1964, Robert Edison founded the Hosiery Mate Company. Hosiery Mate developed and manufactured various chemical formulations for household and industrial cleaners and disinfectants. In 1967, Al Eicoff ("Eicoff") of the A. Eicoff & Co. advertising agency asked Dr. Sylvan Edison and his son Robert ("Edison") to develop a formula for tarnish remover. The resulting compound became known as "Tarn-X."
The Edisons and Eicoff agreed that the formula would be owned by Hosiery Mate and that Eicoff and his partners, Manny, Arthur and Steven Gutterman would be responsible for advertising and distributing Tarn-X. In 1969, the Gutterman defendants and Eicoff asked Robert Edison to develop a product that would remove calcium, lime scale and rust from a variety of surfaces. This second product became known as "CLR." Both products are at issue in this case. The Gutterman defendants dispute Hexagon's depiction of how the formula for Tarn-X originated.
Both parties agree that from 1967 through 1985, Hosiery Mate purchased the chemicals for and manufactured Tarn-X and CLR. Hosiery Mate sold the finished products to the Gutterman defendants, who, in turn, were responsible for marketing. During this time period, Edison kept the formulas for both Tarn-X and CLR in a fireproof, locked filing cabinet in his office. Only Edison had access to the files, and Edison instructed anyone with access to them to keep the formulas confidential. Hexagon admits that Edison gave the formulas to the Gutterman defendants in order to export the products abroad, but Hexagon avers that Edison ordered the formulas to be kept confidential.
In 1985, Edison formed Hexagon, and he assumed the role of chairman of the board and sole shareholder. In May 1985, Edison exclusively licensed and transferred the Tarn-X and CLR formulas to Hexagon and then appointed defendant Ruth as president of Hexagon. Edison instructed Ruth to keep the formulas for the two products confidential.
From 1985 through 1989, Hosiery Mate manufactured Tarn-X and CLR for Hexagon. Hence, it was Hosiery Mate who sold the finished product to the Gutterman defendants.
In the summer of 1986, Ruth introduced Betty Day ("Day") to Edison and recommended that Hexagon hire Day to perform quality control in manufacturing, to improve the existing products, and to develop new products for Hexagon. The Gutterman defendants reinforce that Hexagon had already arranged for Day to handle quality control before the Gutterman defendants themselves expressed their quality control concerns.
Edison authorized Ruth to hire Day; however, he instructed Ruth to tell Day, and he told Day himself, to keep the formulas for Tarn-X and CLR confidential. Day maintained an office at Hexagon and used Hexagon's laboratory. Edison introduced Day to Gutterman "soon thereafter." Hex. Resp. at 6.
Edison acknowledges that he involved Day in the quality control of Tarn-X and CLR before the Gutterman defendants were involved. However, Hexagon argues that, at the insistence of the Gutterman defendants, it gave Day continued and increasing control, including that Day be responsible for releasing each batch and for filling, monitoring and checking each process on the line. Additionally, no batches were bottled until Day approved them. The Gutterman defendants respond that any quality control concerns that they expressed or that they suggested be handled by Day in 1987 was the result of production and manufacturing errors on the part of Hexagon.
During Day's employ at the Hexagon facility, she was retained as an independent contractor by the Gutterman defendants from time-to-time to perform product development and testing functions. For example, the Gutterman defendants assert that Day was paid a consulting fee by them to develop Silver Glaze, Aluminum Glaze and Stainless Glaze. Hexagon counters that Day developed Silver Glaze from a formula for Super Tarn-X, which was developed by Dr. Berliner for Hosiery Mate, and that Hexagon owns all of the beneficial interests in the glazes, which for purposes of this motion, the court accepts as true.
In 1987, Day modified the CLR formula, adding a new detergent which she called "Comet-Acidet." Both parties agree that in 1989, Day invoiced Hosiery Mate for the detergent, sending invoices which showed purchases of Comet-Acidet by the "Betty Day Company."
Day later renamed Comet-Acidet the "CLR Detergent System"; however, neither detergent ever existed. Rather, Day was adding water or nothing to the old products yet claiming that the fictitious chemicals improved the final products or that they reduced the overall manufacturing costs. Both parties agree that from April 1989 to June 1996, the Gutterman defendants paid Day over four million dollars for the CLR Detergent System.
Since at least May 1989, the Gutterman defendants began to pay Day directly for the CLR Detergent System. It is undisputed that Gutterman became Day's primary contact at the Gutterman Companies, and Gutterman and Day enjoyed a close and mutually beneficial relationship. According to Hexagon, as part of the Gutterman/Day/Ruth scheme, Gutterman would pay Day for the nonexistent chemicals and then he would split the payment between himself, Day and Ruth.
Prior to September 1989, Hexagon sent detailed chemical inventories to the Gutterman defendants. However, on September 26, 1989, Gutterman met with Edison and proposed that Day and Ruth take over the chemical purchasing, the product pricing and the billing responsibilities from Hexagon. From then on, Edison understood that Ruth and Day would order the chemicals and Hexagon would bill the Guttermans directly for the finished Tarn-X and CLR.
After the September 26, 1989 meeting, it is undisputed that Day maintained the formulas for Tarn-X and CLR on her computer. Furthermore, both parties agree that Gutterman instructed Edison to cease sending the chemical inventories to him. The Gutterman defendants aver that instead they instructed Blidco, a company run by Day, to send chemical inventories because Blidco ordered the chemicals.
Apparently Day maintained two sets of formula books, one reflecting the actual Hexagon formulas, and the other containing formulas with fictitiously-named and nonexistent chemicals.
The Gutterman defendants add that they requested that Day assume responsibility for purchasing, pricing and billing because Edison and his companies were not paying the chemical vendor bills in a timely fashion and were causing a delay in the delivery of raw materials. Gut. 56.1(A)(3) ¶ 38. The Gutterman defendants were also concerned about rapidly increasing production demands and Hexagon's inability to keep up.
It is undisputed that thereafter, the Gutterman defendants also hired an inventory company, Accurate Inventory, to prepare the chemical inventories. The Gutterman defendants knew that Accurate Inventory's only experience was counting cigarettes and beverages for small convenience stores. The Gutterman defendants instructed Accurate not to conduct the inventory but rather to forward Day's inventories to the Gutterman defendants. At the direction of the...
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