Zemco Mfg., Inc. v. Navistar Intern. Transp. Corp.
| Decision Date | 29 November 2001 |
| Docket Number | No. 02A03-0012-CV-467.,02A03-0012-CV-467. |
| Citation | 759 N.E.2d 239 |
| Parties | ZEMCO MANUFACTURING, INC., Appellant-Plaintiff, v. NAVISTAR INTERNATIONAL TRANSPORTATION CORP., Trayer Products, Inc., NBD Bank, N.A., NBD Equipment Finance, Inc., Pecoraro Manufacturing, Inc., and Joel R. Pecoraro, Appellee-Defendants. |
| Court | Indiana Appellate Court |
Gene R. Leeuw, John M. Mead, Leeuw & Doyle, P.C., Indianapolis, IN, William D. Swift, Swift & Finlayson, Fort Wayne, IN, Attorneys for Appellant.
Robert D. Moreland, Michael L. James, Meg A. Gallmeyer, Baker & Daniels, Fort Wayne, IN, Attorneys for Appellee.
Zemco Manufacturing, Inc. filed a complaint against Navistar International Transportation Corp., Trayer Products, Inc., NBD Bank, N.A., NBD Equipment Leasing Corp., Pecoraro Manufacturing, Inc., and Joel R. Pecoraro (collectively referred to as the "Defendants," where appropriate) alleging that they had violated the Indiana Uniform Trade Secrets Act by misappropriating Zemco's trade secrets, and further alleging that Navistar and NBD had interfered with Zemco's contractual relations. Zemco appeals from the trial court's grant of summary judgment to the Defendants on all counts of Zemco's complaint. We affirm.
Zemco raises four issues for our review, which we consolidate and restate as follows:
1. Whether the trial court properly granted summary judgment to the Defendants on Zemco's misappropriation claim; and 2. Whether the trial court properly granted summary judgment to Navistar and NBD on Zemco's interference with contractual relations claims.
Zemco manufactures machined parts that are primarily made from steel and aluminum, then sells its products to the truck and automobile industry. Navistar manufactures medium and heavy-duty trucks, mid-range diesel engines, school buses, and service parts. Navistar does not make all of the parts needed for the assembly of its products, but rather, buys parts from other manufacturers, including Zemco. The primary part Zemco manufactures for Navistar is the "spring shackle," which attaches suspension springs to truck frames.
The production of spring shackles involves sawing steel or aluminum bar stock to the proper sized blank and then drilling, chamfering, and deburring four precisely aligned holes and milling two slits in each blank. The specifications for spring shackles come from the customer. Zemco has developed a manufacturing process that enables it to mass produce spring shackles to precise specifications at an extremely low cost. For that reason, Zemco was the exclusive supplier of Navistar's spring shackle requirements for over twenty-five years. The thirteen drilling machines Zemco used to produce the spring shackles were custom-built in-house specifically for the manufacturing process developed by Zemco.
From 1980 until February of 1995, Joel Pecoraro, Sr. and Alan Zemen were equal shareholders in Zemco. In 1994, Pecoraro and Zemen had a dispute over control of Zemco, and ultimately, Pecoraro left the company pursuant to a Liquidation and Redemption Agreement (the "Liquidation Agreement") whereby Pecoraro sold his interest in Zemco to Zemen. Pecoraro then formed a new corporation, Pecoraro Manufacturing, Inc. ("PMI"), to conduct the same or similar business as Zemco had done. The Liquidation Agreement provided that Pecoraro could immediately begin competing with Zemco for customers and was entitled to use all of Zemco's trade secrets and proprietary information, if any, in his new business.2 PMI constructed three drilling machines and one milling machine and purchased a band saw in order to manufacture spring shackles. PMI obtained a loan from NBD to fund construction of the machines, which cost approximately $300,000.00. Pursuant to the financing agreement, NBD Equipment Leasing Corp. held legal title to the machines and leased them to PMI. PMI then began soliciting customers, including Navistar.
In July of 1995, Navistar and PMI entered into a contract whereby PMI became Navistar's primary supplier of spring shackles. The contract was to be effective from August 1, 1995 through July 31, 1997. Through the end of 1996, PMI in fact supplied Navistar with spring shackles pursuant to the contract. By early 1997, however, PMI began to experience financial difficulties. Therefore, Navistar contacted Trayer Products, Inc., which company supplied other parts for Navistar, and asked Trayer to submit a quote for spring shackles. By late 1997, PMI's financial difficulties had increased, and PMI was late in producing some parts for Navistar. In January of 1998, Navistar informed Trayer that PMI had ceased business and in February of 1998, Navistar informed PMI that it intended to transition its spring shackle business to another supplier.
At a meeting with Navistar in February of 1998, Pecoraro first informed Navistar that he wanted to sell PMI. Navistar told Pecoraro that it knew of some companies that might be interested in buying PMI. Navistar requested that Trayer submit a bid to purchase the PMI drilling and milling machines, and also advised Pecoraro to sell to Trayer. On March 26, 1998, Trayer purchased PMI's machines from NBD for $300,000.00.
Prior to selling to Trayer, Pecoraro had initiated discussions with KG Manufacturing regarding the possible sale of PMI. KG made an offer to buy PMI, but negotiations broke down when Pecoraro told KG that the Navistar contract would not be part of the deal. Thereafter, Jerome Henry, a minority shareholder in KG, and Vincent Tippman, a shareholder in Zemco following Pecoraro's departure, attempted to purchase KG's rights in its offer. Two assignments were drafted: one by which KG would assign its rights to Henry, and a second by which Henry would, in turn, assign his rights to Tippman. The deal was never completed, however, and PMI was sold to Trayer as described above.
On May 11, 1998, Zemco filed a complaint against the Defendants, alleging in Count I that they had violated the Indiana Uniform Trade Secrets Act by misappropriating Zemco's "proprietary information." The complaint further alleged in Counts II and III that Navistar and NBD had interfered with Zemco's contractual relations. Navistar filed a motion for summary judgment on March 6, 2000, alleging that there was no genuine issue of material fact in that it did not misappropriate Zemco's alleged trade secrets and did not tortiously interfere with Zemco's contractual relations. NBD joined in Navistar's motion without filing a separate designation of evidence. Pecoraro and PMI likewise joined in the motion without a separate designation. Trayer filed its own motion for summary judgment alleging that it did not misappropriate Zemco's alleged trade secrets. Following a hearing, the trial court entered the following order:
This Court, having taken under advisement the Motions for Summary Judgment filed by Defendants [Navistar] and [Trayer], and having considered the arguments of counsel, and the Memoranda filed by the parties herein, as well as their respective Designation of Evidence, and having further considered the Supplemental Memoranda filed by the parties subsequent to the hearing on this matter ..., now rules as follows:
1. That as to Count I of [Zemco's] Complaint, the Court finds that there are no genuine issues of material fact, and that [Navistar] is entitled to summary judgment as a matter of law.
2. That as to Count II of [Zemco's] Complaint, the Court finds that there are no genuine issues of material fact, and that [Navistar] is entitled to summary judgment as a matter of law.
3. That as to Count III of [Zemco's] Complaint, the Court finds that there are no genuine issues of material fact, and that [Navistar] is entitled to summary judgment as a matter of law.
It is therefore ordered that the Motion for Summary Judgment heretofore filed by [Navistar] and joined in by [NBD], [PMI], and [Pecoraro] is GRANTED.
4. That as to Count I of [Zemco's] Complaint, the Court finds that there are no genuine issues of material fact, and that [Trayer] is entitled to summary judgment as a matter of law.
R. 1259-60. Zemco now appeals. Additional fact will be provided as necessary.
Zemco contends that the trial court erred in granting summary judgment to each of the Defendants.
Our standard of review of a summary judgment order is well-settled: summary judgment is appropriate if the "designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Ind. Trial Rule 56(C). Relying on specifically designated evidence, the moving party bears the burden of making a prima facie showing that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law. I/N Tek v. Hitachi Ltd., 734 N.E.2d 584, 586 (Ind.Ct.App.2000), trans. denied. If the moving party meets these two requirements, the burden shifts to the nonmovant to set forth specifically designated facts showing that there is a genuine issue for trial. Id. A genuine issue of material fact exists where facts concerning an issue which would dispose of the litigation are in dispute or where the undisputed material facts are capable of supporting conflicting inferences on such an issue. Gilman v. Hohman, 725 N.E.2d 425, 428 (Ind.Ct.App. 2000), trans. denied. Even if the facts are undisputed, summary judgment is inappropriate where the record reveals an incorrect application of the law to the facts. Id.
A trial court's grant of summary judgment is clothed with a presumption of validity, and the party...
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