Wellington Corp LLC v. Gennari Consulting, Inc.
| Decision Date | 27 September 2022 |
| Docket Number | 4:19-cv-01464 |
| Parties | WELLINGTON CORP LLC, Plaintiff/Counterclaim Defendant, v. GENNARI CONSULTING, INC., Defendant/Counterclaim Plaintiff, and MATTHEW GENNARI, Defendant, v. ROBERT KUNDEL, JR. Third-Party Defendant. |
| Court | U.S. District Court — Northern District of Ohio |
OPINION AND ORDER
For use in his family business, Robert Kundel invented and patented a power tool. Realizing its commercial potential, Mr. Kundel sought to bring the power tool to market. Toward that end, he established a business relationship with Matthew Gennari. Mr Kundel and Mr. Gennari formalized this relationship by causing their respective companies, Wellington Corp and Gennari Consulting, to enter a gross profit distribution agreement granting the parties rights and responsibilities related to the development and sale of Mr. Kundel's patented power tool.
The parties' business venture took a turn for the worse causing the disputes at issue in this litigation. On one side, Mr. Kundel's company Wellington Corp brings claims for breach of contract and tortious interference against Mr. Gennari and his company Gennari Consulting. On the other, Gennari Consulting raises counterclaims against Mr. Kundel and Wellington Corp for breach of contract, unjust enrichment, and conversion and civil theft. Mr. Gennari and Gennari Consulting move for summary judgment on the claims against them (ECF No. 73), while Mr. Kundel and Wellington Corp seek summary judgment on Gennari Consulting's counterclaims (ECF No. 74). For the following reasons, the Court GRANTS the Gennari Defendants' motion for summary judgment (ECF No. 73) and GRANTS IN PART and DENIES IN PART Wellington Corp's and Mr. Kundel's motion for summary judgment (ECF No. 74).
Robert Kundel, Jr. invented a power tool to remove rust from pipes and beams to use in his family business. (ECF No. 76, PagelD #1489-90.) On July 9, 2013, Mr. Kundel received a patent for the tool. (Id., PagelD #1482; ECF No. 6, ¶ 8, PagelD #37; ECF No. 73, PagelD #883.) Later, Mr. Kundel formed Wellington Corp LLC to facilitate the sale of his patented power tool for commercial purposes. (ECF No. 76, PageID #1471-72 & #1478.)
Through Wellington Corp, Mr. Kundel, entered into several agreements related to his patented power tool.
To bring his power tool to market, Mr. Kundel connected with John Cunningham at Stanley Black & Decker. In March 2014, after some negotiations, Mr. Kundel and Wellington Corp entered into a joint development agreement with Stanley Black & Decker to license the patent. (ECF No. 74-3, PagelD #1115-24; ECF No. 76, PageID #1486.) A few months later, during the process of bringing the power tool to market, Stanley Black & Decker terminated the joint development agreement due to lack of resources to commit to the venture. (ECF No. 75, PageID #1257 & #1380; ECF No. 76, PageID #1487.)
However, Cunningham suggested the concept of a “reverse licensing agreement” to assist Mr. Kundel in bringing his power tool to market. (ECF No. 72, PageID #814; ECF No. 75, PageID #1245.) Under this concept, rather than Mr. Kundel licensing his patent to Stanley Black & Decker, Stanley Black & Decker would license its affiliate brands to Mr. Kundel. (ECF No. 75, PageID #1231.)
On March 23, 2016, Mr. Kundel, through Wellington Corp, entered into a reverse licensing agreement with Stanley Black & Decker. (ECF No. 74-5, PageID #1157-85; ECF No. 76, PageID #1534-35.) The agreement permitted Mr. Kundel to sell, distribute, and advertise his power tool under Stanley Black & Decker's affiliate brands, Porter-Cable and Black & Decker. (ECF No. 74-1, PageID #1087; ECF No. 74-5, PageID #1157-85; ECF No. 76, PageID #1534-35.) As part of the agreement, Mr. Kundel was not permitted to develop or sell his power tool bearing competitive third-party brands, which included the Craftsman brand. (ECF No. 72, PagelD #726; ECF No. 74-5, PagelD #1161 & #1189.)
The license agreement terminated on December 31, 2018. (ECF No. 72, PageID #727; ECF No. 74-5, PageID #1175.)
During the course of the license agreement, the Black & Decker branded power tool never gained traction in sales. (ECF No. 72, PageID #733-41.) It was only sold online, not in retail stores. (Id., PageID #735.) Ultimately, only 450 Black & Decker branded units were sold, yielding total revenue of approximately $25,000. (Id., PageID #740.)
After the termination of the initial reverse licensing agreement, Mr. Kundel, through Wellington Corp, extended the license agreement for the Porter-Cable brand for one additional year, starting January 1, 2019. (Id., PageID #729; ECF No. 74-1, PageID #1087; ECF No. 77, PageID #1874.) The license renewal agreement did not include a license for the Black & Decker brand. (ECF No. 72, PageID #729-30; ECF No. 74-1, PageID #1087.)
Shortly after entering into the reverse licensing agreement for Stanley Black & Decker's affiliate brands, Mr. Kundel, through Wellington Corp, executed a buying agreement with Lowe's Companies, Inc. (ECF No. 72, PageID #719.) Under the buying agreement, Lowe's purchased over thirteen thousand units of the PorterCable branded power tool for $1.4 million. (Id., PageID #719-20.) This purchase was a test run. (Id., PageID #720-21.) It took over a year to sell the inventory Lowe's had purchased, partially due to a lack of exposure of the product in stores. (ECF No. 71, PageID #72.)
Around this time, Stanley Black & Decker purchased the Craftsman brand. (ECF No. 76, PageID #1601.) Based on an agreement it reached with Stanley Black & Decker, Lowe's transitioned to selling the Craftsman brand and began to phase out the Porter-Cable brand. (ECF No. 71, PageID #724; ECF No. 76, PageID #1601 & #1603; ECF No. 77, PageID #1872.) Lowe's suggested that Mr. Kundel transition his power tool from the Porter-Cable brand to the Craftsman brand so that he could continue to sell it at Lowe's. (ECF No. 72, PageID #1601.)
During the transition between brands, Mr. Kundel continued to sell the PorterCable branded power tool to Lowe's. (ECF No. 72, PageID #729.) To facilitate sales during the transition, Mr. Kundel extended his reverse license agreement with Stanley Black & Decker for the Porter-Cable brand for an additional year. (Id.; ECF No. 74-1, PageID #1087; ECF No. 77, PageID #1874.) Mr. Kundel also entered into a license agreement with Stanley Black & Decker for the Craftsman brand in October 2018 and planned to launch the Craftsman-branded power tool at Lowe's in October 2019. (ECF No. 72, PageID #744.)
After Stanley Black & Decker cancelled the joint development agreement, Cunningham connected Mr. Kundel with Matthew Gennari. (ECF No. 75, PageID #1299; ECF No. 77, PageID #1768.)
Mr. Gennari is a former employee of and coworker of Cunningham's at Stanley Black & Decker. (ECF No. 75, PageID #1268; ECF No. 77, PageID #1767.) After leaving the employment of Stanley Black & Decker, Mr. Gennari associated with the Chinese company Jinding. (ECF No. 78, PageID #1956.) To work with Jinding, Mr. Gennari formed Gennari Consulting. (Id., PageID #1956.) Gennari Consulting entered into an employment agreement with Jinding, starting in July 2010. (ECF No. 77, PageID #1808 & #1834.)
After Cunningham's introduction, Mr. Kundel began to work with Mr. Gennari to bring his power tool to market. Mr. Gennari presented the power tool to Jinding, which agreed to help bring it to market. (ECF No. 72, PageID #674; ECF No. 77, PageID #1769.) Jinding produced a working model of the power tool for Mr. Kundel to present to buyers. (ECF No. 72, PageID #677-78.) Mr. Gennari facilitated the communication between Mr. Kundel and Jinding. (Id., PageID #679.)
On April 3, 2015, Mr. Kundel, through Wellington Corp, entered into a joint collaboration agreement with Jinding to produce the power tool. (Id., PageID #681; ECF No. 74-4, PageID #1133-35.) Mr. Gennari prepared the agreement on behalf of Jinding. (ECF No. 72, PageID #681; ECF No. 77, PageID #1845.) The agreement granted Jinding the right to sell the power tool outside the United States by paying a royalty to Wellington Corp. (ECF No. 72, PageID #686; ECF No. 74-4, PageID #1133.)
During this time, Mr. Gennari worked with Cunningham at Stanley Black & Decker on developing a reverse licensing agreement so that the power tool could be sold under Stanley Black & Decker's affiliate brands. (ECF No. 77, PageID #1770.) After Wellington Corp entered into the reverse licensing agreement with Stanley Black & Decker, Mr. Gennari worked to secure the buying agreement with Lowe's by meeting with and leveraging his relationships with Lowe's executives. (ECF No. 72, PageID #737; ECF No. 77, PageID #1770-71.)
B.3. Gross Profit Distribution Agreement
On August 12, 2016, Mr. Kundel, through Wellington Corp, and Mr. Gennari, through Gennari Consulting, entered into a one-page gross profit distribution agreement. (ECF No. 69-2, PageID #619; ECF No. 72, PageID #697.) Mr. Kundel maintains that Mr. Gennari prepared the agreement (ECF No. 72, PageID #701), while Mr. Gennari maintains that the two drafted it together and that Mr. Kundel drafted a good portion of it. (ECF No. 78, PageID #2014.)
The profit distribution agreement provides that gross profit generated from the sale of licensed products sold through Wellington Corp would be split 65% to Wellington Corp and 35% to Gennari Consulting. (ECF No. 69-2, PageID #619.) The agreement provides that both parties bear their...
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