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SieMatic Möbelwerke GmbH & Co. KG v. Siematic Corp.

August 12, 2009

SIEMATIC MOBELWERKE GMBH & CO. KG PLAINTIFF,
v.
SIEMATIC CORPORATION, SIEMATIC DESIGN STUDIOS, LLC FRANK W. SIEKMANN, DEFENDANTS.
SIEMATIC CORPORATION AND FRANK SIEKMANN, COUNTERCLAIM-PLAINTIFFS,
v.
SIEMATIC MOBELWERKE GMBH & CO KG, AND ULRICH SIEKMANN COUNTERCLAIM-DEFENDANTS.



The opinion of the court was delivered by: Anita B. Brody, J.

MEMORANDUM

I. Background*fn1

Plaintiff SieMatic Möbelwerke GmbH & Co. KG ("SM Germany") is a German corporation that manufacturers, markets, and sells kitchen cabinetry throughout the world. Defendant SieMatic Corporation ("SMC") is a Georgia corporation with its principal place of business in Pennsylvania. Defendant Frank Siekmann is the Chief Executive Officer of SMC, and a resident of Pennsylvania.*fn2 Both SMC and SM Germany were owned and controlled by August-Wilhelm Siekmann ("AW Siekmann") until the early or mid-1990s, at which point AW Siekmann transferred ownership of SMC to his son, defendant Frank Siekmann, and ownership of SM Germany to his other son, third-party defendant Ulrich Siekmann. SM Germany and SMC thus became two divisions of a family business that were separately owned by half-brothers Ulrich Siekmann and Frank Siekmann, respectively. Because of the longstanding relationship between SM Germany and SMC, SMC placed special trust in SM Germany and Ulrich Siekmann, and believed that SM Germany and Ulrich Siekmann would act in SMC's best interests in their future business dealings.

On April 1, 2003, AW Siekmann executed an agreement in which he granted Frank Siekmann a license (the "License") to use the SieMatic name in connection with the sale of products manufactured by SieMatic Germany in a territory including North and South America (the "2003 Licensing Agreement").*fn3 In the same agreement, AW Siekmann granted his other children, Ulrich Siekmann and Kathrin André, a license to use the SieMatic name in Europe and most of the rest of the world.

The complaint alleges that by 2004, SMC was having substantial financial difficulties. In June 2004, SM Germany made a loan to SMC in the amount of € 800,000 (approximately $1,250,000.00 in U.S. dollars, based on 2008 exchange rates) (the "2004 Loan Agreement"). Despite this infusion of capital, SMC continued to struggle financially.

SMC alleges that it was dependent on SM Germany for product shipments at this time, and that SM Germany knew that it had financial and functional dominance over SMC. In April 2005, in an attempt to salvage its business, SMC entered into discussions with SM Germany which resulted in the execution of an agreement whereby SMC agreed to act as SM Germany's sales agent in soliciting sales of its products in North and South America (the "2005 Sales Agency Agreement"). SMC alleges that it would have "preferred not to" have signed that agreement, but was pressured into it by SM Germany. According to SMC, the 2005 Sales Agency Agreement was an instrument requested by SM Germany to avoid successor liability in the event that creditors of SMC attempted to pursue SM Germany after SM Germany took over SMC's remaining business. At this time, SM Germany and SMC were discussing numerous scenarios for the restructuring of SMC's operations, and SM Germany had access to SMC's books and records. SM Germany advised SMC and gave it "direction and counsel" regarding SMC's business operations, which, because of SMC's financial situation, they "had no choice but to accept."

SMC ceased operations in June 2005. On July 1, 2005, Frank Siekmann and SM Germany entered into an agreement with the newly formed Kitchen Interior Designs, Inc. ("KID"),*fn4 in which SMC's License was transferred to KID in return for KID's obligation to pay Frank Siekmann certain fees, and SM Germany agreed to act as the surety for KID's obligations under that agreement (the "2005 KID Agreement").

On November 22, 2006, SM Germany filed a complaint against SMC, Frank Siekmann, and another company owned by Frank Siekmann, Siematic Design Studios, LLC ("SDS").*fn5 The complaint was amended on August 19, 2008. On August 28, 2008, the defendants filed their First Amended Answer, Affirmative Defenses and Counterclaims (the "First Amended Answer") (Doc. #62). The First Amended Answer asserted a total of seven counterclaims against SM Germany and cross claims against Ulrich Siekmann as a third-party defendant:

* Count I: Breach of Contract (SMC v SM Germany);

* Count II: Breach of Contract (Frank Siekmann v SM Germany);

* Count III: Tortious Interference (SMC v SM Germany);

* Count IV Tortious Interference (Frank Siekmann v SM Germany and Ulrich Siekmann);

* Count V: Breach of Fiduciary Duty (SMC v SM Germany);

* Count VI: Aiding and Abetting Breach of Fiduciary Duty (SMC v ...


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