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Interlake Mecalux, Inc. v. Summit Steel & Manufacturing

October 2, 2009

INTERLAKE MECALUX, INC., PLAINTIFF
v.
SUMMIT STEEL & MANUFACTURING, ADAM L. WITMAN, BOB NEWTON, RONALD K. GUDINAS, AND GEORGE H. MERRITT, JR., DEFENDANTS



The opinion of the court was delivered by: William W. Caldwell United States District Judge

MEMORANDUM

I. Introduction

The plaintiff, Interlake Mecalux, Inc. ("Interlake"), filed a six count complaint against the defendants, Summit Steel and Manufacturing, Inc. ("Summit Steel"), Adam L. Witman, Bob Newton, Ronald K. Gudinas and George H. Merritt, Jr. (the "individual Defendants"), alleging: (1) breach of fiduciary duties and breach of confidentiality agreements against the individual defendants; (2) civil conspiracy to breach fiduciary duties and confidentiality agreements against all defendants; and (3) breach of nonuse/nondisclosure agreements, and tortious interference with business relations against Summit Steel.

Pending before the court is Interlake's motion for a preliminary injunction and Summit Steel's motion to refer and/or transfer the case to the United States Bankruptcy Court for the District of Delaware. We have jurisdiction pursuant to 28 U.S.C. § 1332. For the reasons that follow, we will deny both motions.

II. Factual and Procedural Background

Interlake is a Delaware corporation with its principal place of business in Melrose Park, Illinois. Summit Steel is a Pennyslvania Corporation with its principal place of business in Reading, Pennsylvania. Summit Steel is a fabricator of machine parts and manufacturer of tubing and bar related products. J&D Company was a longstanding customer of Summit Steel. The individual Defendants are all former employees of J&D Company. Summit Steel currently employs Defendants Gudinas, Newton and Witman.

J&D Company is a debtor in bankruptcy. J&D was in the business of servicing and manufacturing vertical motorized storage systems for industrial and retail use. J&D operated two divisions, Retail Service Solutions ("RSS") and J&D Manufacturing ("JDM"). RSS was the service side of J&D's business, while JDM was its manufacturing division.

As early as November of 2008, J&D was experiencing financial difficulties. (Hearing Transcript ("HT"), 9/9/2009 at 14-15). As early as January of 2009, J&D Company personnel were discussing the potential sale of the business. (HT, 9/9/2009 at 38-39). Joseph DePoto, a former J&D Company employee, now employed by Interlake, testified that at a January 2009 meeting several potential buyers for JDM were discussed. (HT, 9/9/2009 at 38-40). In February of 2009, Summit Steel was approached and informed that J&D Company would either be sold or liquidated. (HT, 9/17/2009 at 5-6).

J&D Company invited Summit Steel to bid on its RSS division in March of 2009. Id. at 8-9. At the end of March, Gary Romig, acting in his capacity as president of Summit Steel, signed a non-use and non-disclosure agreement ("NDA"). Id. at 29. The partes to the NDA were Summit Steel and J&D Company, LLC. Ex. D. The NDA prohibited the use of any confidential information for any purpose other than to evaluate and engage in discussions about the sale of J&D Company assets, in this instance the RSS division. Ex. D ¶¶ 2 and 3. Interested parties had to sign a NDA in order to be given access to marketing materials, detailing the assets to be purchased, and a database detailing confidential information on the RSS and JDM divisions. (HT, 9/9/2009 at 85). On or about March 25, 2009, Summit Steel offered to purchase the J&D Company's assets, inventory and some account receivables. (HT, 9/17/2009 at 8-9). After being told that another party was interested in purchasing the RSS division, Summmit Steel undertook a cursory review of RSS and decided against purchasing it. Id. at 8-10.

The RSS and JDM divisions of J&D Company were purchased by Interlake out of bankruptcy on June 29, 2009 and July 23, 2009, respectively. After these sales were approved by the bankruptcy court, the court confirmed the bankruptcy plan of J&D Company on August 11, 2009. The plan became effective on August 24, 2009.

Throughout this process, beginning as early as January of 2009 and continuing into June of that same year, Summit Steel interacted with J&D Company employees and customers. (HT, 9/9/2009 at 16-17). There is conflicting evidence as to whether these discussions were part of Summit Steel's due diligence into its potential purchase of JDM or whether it was an improper solicitation in an attempt to syphon-off J&D Company business. The testimony of Mr. DePoto indicates that there was a discussion at a January 2009 meeting involving a mass resignation of several of the individual Defendants, namely Mr. Witman, Mr. Merritt and Mr. Newton, in order to cripple J&D's business. (HT, 9/9/2009 at 16-17). However, the testimony of Mr. Merritt, which we find credible, rebuts the testimony of Mr. DePoto. Mr. Merritt and other employees were told to keep all leads on potential buyers open, which included Summit Steel. (HT, 9/17/2009 at 93-97). On the day of his resignation, Mr. Merritt delivered four new sales agreements to J&D Company. Id. at 93-94. He also testified that he, Newton and Witman waited until after July 4th to resign, so they could receive vacation pay for the holiday. Id. at 23. At the time of these resignations, J&D Company had stopped taking orders, stopped manufacturing goods and had begun layoffs. Id. The evidence also shows that Summit Steel made no offers of employment to the individual Defendants prior to their resignations. Id. at 25.

There is also conflicting evidence regarding Summit Steel's acquisition of a vertical carousel machine rack. J&D Company claims that Summit Steel improperly received confidential information on the engineering of this rack. However, Summit Steel claims, and is supported by the record, that it acquired the carousel from J&D Company as an offset for money it was owed by J&D Company. It then reverse-engineered this rack without using any blueprints or other confidential information. We believe the evidence is overwhelming to support Summit Steel's reverse-engineering claim, and the claims of Interlake are not supported by the record.

On August 18, 2009, Interlake filed its complaint in the Court of Common Pleas for Dauphin County, Pennsylvania seeking a temporary restraining order and a preliminary injunction. The case was removed to this Court on August 24, 2009. We denied Interlake's motion for a temporary restraining order on August 26, 2009. Summit Steel then filed its motion to refer and/or transfer this case to the Bankruptcy Court for the District of Delaware.

III. Discussion

A. Motion to Refer/Transfer

At the outset, Summit Steel argues that we lack jurisdiction to hear this action because it is a "core" proceeding under the bankruptcy code and the bankruptcy court is afforded exclusive jurisdiction over such claims. Interlake argues that this action cannot be transferred because the bankruptcy court lacks jurisdiction.

Even if we assume, arguendo, that this matter falls under Title 11, Summit Steel's position is untenable in light of 28 U.S.C. § 1334. Section 1334 confers "original but not exclusive jurisdiction" on the district courts over all civil proceedings "arising under," "arising in" or "related to" cases under Title 11. 28 U.S.C. § 1334(b). The real question that concerns us is whether we should ...


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