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Ancraft Products v. Universal Oil Products





APPEAL from the Circuit Court of Cook County; the Hon. ARTHUR SULLIVAN, Judge, presiding.


Rehearing denied June 30, 1980.

Ancraft Products Company (Ancraft) brought suit against Universal Oil Products Company, Inc. (UOP), Peerless Metal Fabricators, Inc. (Peerless) and Martin Sacks (collectively referred to as defendants). In count I of Ancraft's second amended complaint, Ancraft sought compensatory and punitive damages for an alleged conspiracy by defendants to convert the trade secrets of Ancraft and maliciously to interfere with Ancraft's business relationships. UOP and Sacks and also Peerless filed motions for summary judgment on count I. (Ill. Rev. Stat. 1977, ch. 110, par. 57.) The trial court then allowed Ancraft to take depositions of 15 witnesses. The trial court granted both motions for summary judgment and dismissed count I. Ancraft appeals.

Ancraft is a corporation engaged in design and production of specialized tools and machinery. Ernest W. Nyberg was the president, director and owner of 51 percent of Ancraft's stock. One of the designers and engineers at Ancraft was Arthur W. Virta, who was also an officer and director. He owned 49 percent of Ancraft's stock. Peerless is in the same business as Ancraft. UOP is a purchaser of the type of machinery produced by Ancraft and Peerless. UOP uses this equipment to produce parts for automobile exhaust systems. Martin Sacks is an employee of UOP.

In 1972, UOP's engineers, Hoyer, Schlesinger, Turner, Inc. (HST), hired Ancraft to build a piece of machinery called a monolith impregnator for UOP. The parts produced by this machine are used by automobile companies in fabrication of catalytic converters for automobile exhaust systems. UOP and its engineers created the design, drawings, specifications and data flow sheets for the monolith impregnator. This information was transmitted to Ancraft which built the machine according to UOP's specifications. These plans were the property of UOP. Nyberg signed a secrecy agreement as president of Ancraft. Ancraft agreed to keep the plans in secrecy and confidence and to return them to HST upon completion of the project.

Ancraft manufactured one laboratory test machine and then a prototype 24-station monolith impregnator. This machine coats a large ceramic block (monolith) with chemicals. Arthur Virta was in control of the project for Ancraft. Also he followed the equipment to UOP's plant in Catoosa, Oklahoma, where he helped UOP personnel install it. Virta made modifications so the monolith machine would operate in harmony with machinery already in the plant.

Once the workability of the monolith machine was established, UOP issued a purchase order to Ancraft for three working models of the machine. The order was issued in May 1973 and delivery was to be made in late 1973 and early 1974. This project constituted the major portion of Ancraft's business in 1973-1974. Ancraft employed Virta's son Edwin, a college student, part-time in the summers as Virta's assistant in the engineering and design of the project as well as several machinists who worked on the fabrication and assembly of the monolith impregnators.

As the three monolith machines were produced and assembled at Ancraft's shop, they were shipped to UPO's plant in Catoosa where they were combined with other equipment in the plant. During this period of time, Virta spent approximately 60 to 70 percent of his time at UPO's plant. It was at the plant that Virta met Martin Sacks in January 1974. Sacks had become UPO's project manager for the Catoosa plant in October or November of 1973. Sacks testified Virta was instrumental in getting the monolith machines to work properly by making modifications at the Catoosa plant to the monolith machines and the other equipment at the plant.

In late 1973 and early 1974, discussions were held between Nyberg and Virta about the possibility of Virta acquiring control of Ancraft. Proposals were exchanged between them and their respective attorneys. The parties met to negotiate such an agreement. However, no agreement was ever reached. Neither UOP nor its employees were told of this internal dispute at Ancraft at the time negotiations were being held.

In late May 1974, a meeting was held by UOP's management personnel in charge of the monolith project to consider whether or not a similar system could be developed for the impregnation of pellets. That meeting was attended by Martin Sacks. Thereafter, Virta was asked by someone at UOP to submit a bid on behalf of Ancraft for the production of a pellet impregnator machine. It would be used to coat pellets with a chemical solution. This pellet impregnator would be partly like the monolith impregnator but mainly it would be completely new.

The requested proposal was delivered in writing by Virta to Sacks before July 1, 1974; on or about June 24, 1974, the date which appears thereon. Nyberg testified he was never consulted or advised by Virta of the request for this proposal or the fact of its delivery to UOP. Virta testified that when he delivered the proposal to Sacks, he told Sacks Ancraft could do a good job and they would stand by the bid because he delivered it as an agent of Ancraft. Then Virta told Sacks, "I will no longer be employed at Ancraft after the first of the month but you go to them and have this bid there." Virta's projected cost of the new machine was $440,000 of which approximately $100,000 would be for engineering.

John Larson, general manager of UOP's Automotive Parts Division, testified that on July 2, Sacks told him Virta had informed Sacks that he was "now fully and officially separated from Ancraft and wanted to discuss a position of employment with UOP." The next morning, Larson, Sacks and John Witt, purchasing agent for UOP, met to discuss the "Virta situation." Witt testified that at the meeting, it was brought to his attention Virta had terminated his association with Ancraft. The three men felt Virta's departure from Ancraft was a serious matter because "Mr. Virta represented the knowledge about our equipment that was produced at Ancraft"; "someone [else] would have to start from scratch" to acquire the knowledge Virta had; and this would cause a delay in the completion of the Catoosa plant.

Larson further testified that even before he found out Virta was leaving Ancraft, he was thinking of getting a different shop to work on the pellet impregnator because UOP had almost finished its relationship with Ancraft with respect to the monolith impregnators and Larson wanted a better organized shop with a larger capability. When Larson found out Virta was leaving Ancraft, he felt there was no way UOP could justify continuing a supply position with Ancraft because "Ancraft was basically Mr. Virta * * *."

The three men discussed a possible consultantship for Virta. Larson indicated that would be acceptable to him. Larson called the legal department of UOP to determine if UOP was free to hire Virta as a consultant. The three men met with Virta that afternoon of July 3. Virta testified Sacks and Larson told him they hoped they could use his services in the future and they were conferring with the legal department to make sure there was no conflict of interest. Later, in the "middle of July" UOP called Virta in and told him they had consulted with their attorneys and his hiring as a consultant for UOP was approved.

On July 10, 1974, a meeting was held at Ancraft's plant which was attended by Nyberg, Sacks, Witt and Virta. The purpose was to end confusion as to various purchase orders by UOP for additional parts for the monolith machines. Sacks cancelled a few of the purchase orders. Nyberg testified this was ...

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