Techna-Fit, Inc. v. Fluid Transfer Prods., Inc.

• Decision Date: 14 October 2015
• Docket Number: No. 32A05–1410–PL–462.,32A05–1410–PL–462.
• Citation: 45 N.E.3d 399
• Parties: TECHNA–FIT, INC. and Stuart Trotter, Appellants, v. FLUID TRANSFER PRODUCTS, INC., Appellee.
• Court: Indiana Appellate Court

45 N.E.3d 399

TECHNA–FIT, INC. and Stuart Trotter, Appellants

v.FLUID TRANSFER PRODUCTS, INC., Appellee.

No. 32A05–1410–PL–462.

Court of Appeals of Indiana.

Oct. 14, 2015.

George T. Patton, Jr., Bryan H. Babb, Bose McKinney & Evans LLP, Indianapolis, IN, Jeffrey S. Nickloy, Nickloy & Higdon, Noblesville, IN, Attorneys for Appellants.

Michael L. Einterz, Jr., Einterz & Einterz, Zionsville, IN, Attorney for Appellee.

NAJAM

, Judge.

Statement of the Case

[1] Techna–Fit, Inc. filed a complaint against Fluid Transfer Products, Inc. (“FTP”) alleging, among other claims, that FTP engaged in unfair competition with Techna–Fit in violation of a provision of the Lanham Act, 15 U.S.C. § 1125

, and seeking injunctive relief. FTP filed a counterclaim against Techna–Fit alleging breach of contract and a third-party claim against Stuart Trotter alleging breach of contract, breach of fiduciary duty, defamation, and deception. Techna–Fit and FTP each filed motions for partial summary judgment, which the trial court denied. Following a bench trial with the assistance of an advisory jury, the trial court entered judgment in favor of FTP on Techna–Fit's claims, its counter-claim against Techna–Fit for breach of contract, and its third-party claims against Trotter for breach of contract and breach of fiduciary duty. The trial court awarded damages to FTP as follows: $662,901.86 for Techna–Fit and Trotter's breach of contract; $125,000 for Trotter's breach of fiduciary duty; and punitive damages for Trotter's breach of fiduciary duty in the amount of $1,500,000. FTP requested attorney's fees, which the trial court awarded following a hearing. Techna–Fit filed a motion to correct error, which the trial court denied.

[2] Techna–Fit¹ now appeals and presents the following issues for our review:

1. Whether the trial court erred when it denied Techna–Fit's motion for partial summary judgment as an improper repetitive motion under Trial Rule 53.4

;

2. Whether the trial court abused its discretion when it excluded certain evidence at trial;

3. Whether the trial court abused its discretion when it refused a proposed jury instruction;

4. Whether the trial court erred when it found that a release executed by Techna–Fit and FTP did not preclude FTP's breach of contract claim against Techna–Fit;

5. Whether the trial court erred when it awarded FTP $1,500,000 in punitive damages; and

6. Whether the trial court abused its discretion when it awarded FTP $146,661.43 in attorney's fees.

[3] We affirm in part and reverse in part.²

Facts and Procedural History

[4] In 1996, in California, Trotter founded Techna–Fit, which manufactures and sells aftermarket brake lines, clutch lines, and other automotive products for hundreds of different vehicles. In 1999, Techna–Fit developed a system for numbering its parts, combining a series of letters and numbers to indicate a particular number of brake line or clutch line and the automobile for which the line could be used. For example, part number “MIT1025” indicates a brake line for a Mitsubishi Lancer.

[5] In 2005, Trotter and Michael Lang formed FTP, an Indiana corporation. FTP manufactured and sold products under the Techna–Fit brand name, and Techna–Fit gave the majority of its east coast and midwestern customers to FTP.³ FTP used Techna–Fit's parts-numbering system. Initially, Trotter owned 80% of FTP's stock, and Lang owned the remaining 20%. Over time, Lang's ownership increased to 50%.

[6] In 2012,

[a] dispute arose ... between Mr. Trotter and Mr. Lang regarding Mr. Lang's decisions and the operation of FTP. In March 2012, Mr. Trotter asked that FTP be shut down. Mr. Lang did not agree with this plan. So, on April 9, 2012, Mr. Trotter filed a lawsuit for dissolution of FTP against Mr. Lang for breach of fiduciary duties to FTP.

On April 18, 2012, Mr. Trotter formed a new Indiana corporation also known as Techna–Fit, Inc., the purpose of which was to do the exact same thing as FTP and California Techna–Fit had been doing. At the time, Mr. Trotter was the sole owner of both the California and the Indiana corporations named Techna–Fit, Inc. Mr. Lang was initially unaware of the formation or existence of Mr. Trotter's new Indiana corporation.

In May 2012, Techna–Fit hired FTP's employee Chris Herman to work in Techna–Fit's new Indiana location.

Mr. Trotter and Mr. Lang were able to negotiate a settlement of the lawsuit Mr. Trotter had filed against FTP and Mr. Lang. They entered into a settlement agreement entitled Mutual Release and Stock Sale Agreement—or simply, “the Mutual Release.” Mr. Trotter and Techna–Fit, as well as Mr. Lang and FTP, were parties to this Mutual Release, which included a variety of releases and promises, as well as providing for the sale of all of Mr. Trotter's interests in FTP. The Mutual Release was executed in June 2012, and thereafter Techna–Fit and FTP proceeded with their business[es] as separate competitors.

Appellants' App. at 1352–53.

[7] The parties' Mutual Release provided in relevant part as follows:

4. Exchange of Customer Data. Trotter has access to FTP's Customer Data, including the names, addresses and purchase history of all customers to which FTP has sold products, as well as the phone numbers and identity of customer-contacts for each such customer, all of which is collectively referred to herein as Customer Data. Both Trotter and FTP may continue to use the Customer Data following Closing. Trotter may provide the Customer Data to Techna–Fit for Techna–Fit's legitimate use, or to any other business entity solely owned by Trotter or Techna–Fit but Trotter (and Techna–Fit) shall not provide the Customer Data to any third party, and shall take all reasonable efforts to maintain the confidentiality of the Customer Data.

* * *

7. Government Certification. FTP shall not make any representations that it has current government certification for any of its products through any ongoing agreement or relationship with Techna–Fit, or otherwise represent to anyone that it has any business relationship of any kind with Techna–Fit.

8. Non–Disparagement and Non–Interference.... None of the Parties will interfere in the legitimate business of the other Parties or induce or encourage any supplier to refrain from doing business with any other Party. But nothing herein shall prevent a Party from entering into an exclusive relationship with either a supplier or a customer, or from engaging in legitimate competition with the other Party.

* * *

11. Release of Lang and FTP. Trotter and Techna–Fit jointly and severally release FTP and Lang from (a) all debts, duties and obligations of any kind which either FTP or Lang may have jointly or severally owed to Trotter or Techna–Fit prior to Closing, and (b) all claims, complaints and causes of action which Trotter or Techna–Fit had or may have had against FTP or Lang, either jointly or severally, that existed prior to Closing. But, the releases herein granted shall not apply until Closing is completed, and shall become void if this agreement is breached by FTP or Lang within 12 months following Closing. This release shall apply to both known and unknown debts, duties, obligations, claims, complaint and causes of action.

12. Release of Trotter and Techna–Fit. FTP and Lang jointly and severally release Trotter and Techna–Fit from (a) all debts, duties and obligations of any kind which either Techna–Fit or Trotter may have jointly or severally owed to Lang or FTP prior to Closing, and (b) all claims, complaints and causes of action which Lang or FTP had or may have had against Techna–Fit or Trotter, either jointly or severally, that existed prior to Closing. But, the releases herein granted shall not apply until Closing is completed, and shall become void if this agreement is breached by Techna–Fit or Trotter within 12 months following Closing. This release shall apply to both known and unknown debts, duties, obligations, claims, complaint and causes of action.

Appellants' Addendum to Br. at Tab 3 (emphases added).

[8] When Trotter left FTP and started Techna–Fit Indiana, Trotter did not require FTP to change its parts-numbering system, and nothing in the Mutual Release addressed FTP's continued use of that system. Accordingly, FTP continued to use the same parts-numbering system that it had been using since its inception, and Techna–Fit continued to use the same system, as well. A short time after the two companies split, Techna–Fit received complaints from customers about what they thought were Techna–Fit products, but Techna–Fit discovered that the parts had been manufactured by FTP. Accordingly, Techna–Fit's lawyer contacted FTP's lawyer to inform FTP about the problem. Specifically, Techna–Fit informed FTP that Techna–Fit's parts-numbering system was unique to Techna–Fit and FTP's use of the same system was causing customer confusion. Techna–Fit also contacted several of FTP's distributors, including TH Motorsports, and told them to stop using the Techna–Fit name on purchase orders submitted to FTP. Over the course of several months and after several emails between Techna–Fit's and FTP's lawyers, FTP agreed to change its parts-numbering system effective February 1, 2013. In the meantime, FTP learned that: shortly after Techna–Fit and FTP began to compete against one another in 2012, Techna–Fit filled orders that had been directed to FTP but received by Techna–Fit; Techna–Fit copied and sold product designs belonging to an FTP customer without permission; and Techna–Fit filled orders requesting parts identified with FTP's new parts-numbering system.

[9] On February 7, 2013, Techna–Fit filed a complaint against FTP alleging unfair competition due to FTP's use of Techna–Fit's parts-numbering system and seeking damages and injunctive relief. FTP filed an answer and asserted affirmative defenses, a counter-claim against Techna–Fit alleging breach of contract, and a third party complaint alleging that: Trotter and Techna–Fit Indiana⁴ breached the Mutual Release; Trotter...