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Bee Chemical Co. v. Service Coatings

OCTOBER 31, 1969.

BEE CHEMICAL COMPANY, A CORPORATION, PLAINTIFF-APPELLEE,

v.

SERVICE COATINGS, INC., A CORPORATION, ET AL., DEFENDANTS-APPELLANTS, UNIROYAL, INC., INTERVENOR.



Appeal from the Circuit Court of Cook County; the Hon. DONALD J. O'BRIEN, Judge, presiding. Affirmed.

GOLDENHERSH, P.J.

Defendants, Service Coatings, Inc., a corporation, hereafter called Service Coatings, Robert W. Moore, Robert A. Bukvich, Ronald Widing and Caryl Wieneke, appeal from the order of the Circuit Court of Cook County finding them guilty of contempt for failure to comply with certain discovery rules and orders.

In its amended complaint, in seven counts, plaintiff, inter alia, alleges that the individual defendants were formerly in its employ, while so employed they acquired plaintiff's secret formulas and other secret information, and thereupon left its employ to become officers and agents of the "newly formed" corporate defendant. Plaintiff alleges further that defendants are wrongfully using its trade secrets in the manufacture of certain products used by the automobile industry.

Following service of notice to take depositions and request for production of documents and other matters, defendants moved for a protective order preventing "divulgement of its formulations." Other motions, to limit discovery, not here material, were filed by all parties, and the trial court entered a comprehensive order which included the following:

"13. Defendants produce, under Paragraph 6 of plaintiff's Supplementary Notice of Taking Depositions, all formulae, indicating component ingredients, for products manufactured or sold by Service Coatings, Inc., to the `auto-soft' industry. Said formulae are to be given to counsel for plaintiff and shown only to Richard E. Jarzombek, Glenn K. Short, Thomas E. Hayden and Victor H. Rampelberg, plaintiff's employees assisting counsel for plaintiff in this case, and said formulae are to be used only for purposes of this case. Plaintiff may supplement this order specifying persons who may examine said formulae by naming outside experts to defendants within sixty days of the beginning of trial.

"14. Plaintiff produce, under Paragraphs 1 and 16 of defendants' Supplementary Notice of Taking Depositions, all formulae, indicating component ingredients, developed on or before September 21, 1965, for products manufactured and sold by Bee Chemical Company to the `auto-soft' industry, together with any memoranda of changes in formulae developed on or before September 21, 1965. Said formulae and changes in formulae are to be given to counsel for defendants and shown only to the individual defendants and Arthur Kopisch, president of the corporate defendant, and said formulae and changes in formulae are to be used only for purposes of this case. Defendants may supplement this order specifying persons who may examine said formulae by naming outside experts to plaintiff within sixty days of the beginning of trial.

"15. The Court also grants a protective Order to both parties so that their trade secrets shall remain trade secrets, and each party has a mutual restriction from using the formulae obtained from the other."

Defendants moved to vacate the order, the court heard testimony, denied the motion, and directed defendants to comply with its order. Defendants refused to produce the formulas, plaintiff moved for the imposition of sanctions, defendants admitted the material allegations of plaintiff's motion, the court found them in contempt of court, imposed a fine, and this appeal followed.

Shortly before the imposition of sanctions, Uniroyal, Inc. filed a petition for leave to intervene. The record does not reflect a written order allowing the petition, however in colloquy between court and counsel the court stated the petition was allowed. The status of Uniroyal in this appeal will be discussed later in the opinion.

The evidence shows that the formulas in question are used to produce a lacquer type coating for a vacuum-formed automotive door panel. This type of panel is one of a number of products used in the automobile industry and classified as "auto-soft."

In support of defendants' motion to vacate the order, defendant Moore, vice-president of Service Coatings, testified that he had been employed for 13 years by United States Royal Rubber Company, now Uniroyal; during the last six years of his employment he was in charge of research; his work was principally with polymers, the same generic class of materials as are here involved, and was directed toward development of lacquer type materials. He left that position and entered plaintiff's employ. He was employed by plaintiff for two years, terminating in September 1965. After leaving plaintiff's employ, he organized Service Coatings. He described differences between the processes used by plaintiff and defendant, Service Coatings; Service Coatings submitted several materials to Uniroyal and after rejection "made some fairly radical departures from standard lacquer technology and submitted materials that looked fairly promising." Several were rejected, and finally one met the specifications. He stated that when he and the other defendants left plaintiff's employ, these coatings were not commercially available; at that time one raw material was available only as a pilot plant product, and other materials now utilized were not on the market. He denied that knowledge of plaintiff's formulas was of value in the discovery of a satisfactory product. He admittedly knew plaintiff's formulas for a coating for vacuum formed products but was not familiar with any of plaintiff's formulas specifically for vacuum formed door panels. He stated his knowledge of the substrate material to which the coating is applied, gained in his employment by Uniroyal, was the chief factor in his success.

Charles O'Shinski, employed at Uniroyal's plant in Chicago from 1952, plant manager from 1957 until shortly before the hearing, and now employed at Uniroyal's Port Clinton plant, testified that defendant, Service Coatings, after several submissions which were not satisfactory, had since early 1966 been delivering a coating which met the specifications of the customer for whom Uniroyal made the material used in the door panels. Uniroyal also purchased coatings from plaintiff, but plaintiff had not submitted a coating which met the specifications of Uniroyal's customer. He also testified that in a phone conversation with Moore it was agreed that Service Coatings would not, without Uniroyal's consent, sell the coating to anyone other than Uniroyal, although Uniroyal was free to develop other sources of supply.

Mr. Moore's version of the agreement is somewhat different, and he testified it was made at a luncheon meeting.

Jack Padgitt, process control manager for Uniroyal, testified with respect to tests of the products of plaintiff and defendant, Service Coatings. He testified that Uniroyal had obtained waivers of certain specifications from its customer in order to enable Service Coatings to get into production. He stated he had told Thomas E. Hayden, plaintiff's vice-president, he could not prove by tests there was a difference, insofar as pliability is concerned between plaintiff's coatings and those made by defendant, Service Coatings, however, ...


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