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Unichem Corp. v. Gurtler

OPINION FILED SEPTEMBER 25, 1986.

UNICHEM CORPORATION, PLAINTIFF-APPELLEE,

v.

WILLIAM W. GURTLER ET AL., DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County; the Hon. Harold Siegan, Judge, presiding.

PRESIDING JUSTICE LINN DELIVERED THE OPINION OF THE COURT:

Rehearing denied October 30, 1986.

Plaintiff, Unichem Corporation (Unichem), instituted this action seeking both injunctive relief and monetary relief from William Gurtler, a former president and director of Unichem, and Gurtler Chemicals, Inc., a corporation William Gurtler established after he resigned from Unichem. In its two-count amended complaint, Unichem alleges: (1) that Gurtler breached the fiduciary duty he owed to Unichem; and (2) that Gurtler Chemicals violated the Uniform Deceptive Trade Practices Act (Ill. Rev. Stat. 1981, ch. 121 1/2, par. 311 et seq.).

After various depositions were taken, Unichem moved for summary judgment claiming that, as a matter of law, Gurtler breached the fiduciary duty he owed to Unichem and that, as a matter of law, Gurtler Chemicals violated the Uniform Deceptive Trade Practices Act. Following a hearing on the matter, the trial court granted Unichem's summary judgment motion. In granting Unichem's motion, the trial court permanently enjoined Gurtler Chemicals from selling any product with a label deceptively similar to Unichem's and, in addition, ordered an accounting to determine the profits made by Gurtler Chemicals at Unichem's expense. At the conclusion of the accounting hearings, the trial court entered judgment in favor of Unichem in the amount of $47,964.80. In addition, the court granted Unichem $1,150.50 in attorney fees arising from Gurtler Chemicals' failure to comply with one of the trial court's orders.

On appeal, Gurtler contends that material issues of fact still exist and that, as a result, the trial court erred in finding that he breached his fiduciary duty as a matter of law. Gurtler Chemicals, on the other hand, asserts: (1) that material issues of fact still exist as to whether it violated the Uniform Deceptive Trade Practices Act and that summary judgment was therefore improper; (2) that even if it did violate the Act, an accounting was an improper remedy; and (3) that the trial court erred in awarding attorney fees to Unichem.

We affirm the decision of the trial court.

BACKGROUND

Plaintiff Unichem is an Illinois corporation in the business of producing and selling chemical laundry products. Defendant Gurtler was the president and a member of Unichem's board of directors until he resigned from his positions on March 12, 1982. Greg B. Gurtler (G.B. Gurtler) is Gurtler's son and was a salesman with Unichem until he resigned on January 1, 1982. Defendant Gurtler Chemicals is in the same line of business as Unichem and was incorporated, with Gurtler and G.B. Gurtler as two of its officers, on March 23, 1982.

The record reveals that during 1981 Gurtler was president of Unichem and his son, G.B. Gurtler, was Unichem's sole salesman in the Ohio region. In November of 1981 Gurtler contacted his cousin, Lester C. Gurtler, the plant manager at Unichem. Gurtler informed Lester that he was going to leave Unichem soon and encouraged Lester to leave Unichem also. Lester agreed.

During the month of December 1981 Gurtler learned that his son was also going to leave Unichem in the near future. Gurtler further learned that G.B. Gurtler was looking for a building to house a new business which he intended to open after he left Unichem. The new business would produce the same type of goods as that manufactured by Unichem and would compete with Unichem for the same customer base. On December 30, 1981, G.B. Gurtler, on behalf of "Gurtler Chemicals of Illinois" entered into a lease for a warehouse. On January 1, 1982, G.B. Gurtler resigned from Unichem. Although Gurtler was aware that his son was establishing a rival business, he failed to inform any of Unichem's other officers as to those developments.

After January 1, 1982, Gurtler personally approved five separate sales of Unichem goods to G.B. Gurtler. The sales occurred on January 6, 14, 21, 22 and 28, 1982. These sales to G.B. Gurtler were at a price substantially lower than the normal price that Unichem charged its customers. In fact, the price charged to G.B. Gurtler barely covered the cost of producing the material and provided Unichem with only marginal profit. In addition, the sales were made on credit to G.B. Gurtler, who possessed no credit history. Although Gurtler was aware that G.B. Gurtler was obtaining Unichem products for the sole purpose of reselling the goods to Unichem customers (with the profits going to Gurtler Chemicals), Gurtler failed to inform Unichem's other officers of G.B. Gurtler's purchases.

When G.B. Gurtler resigned from Unichem on January 1, 1982, Gurtler did not attempt to notify Unichem's other officers until he sent a memo describing G.B. Gurtler's resignation. While the memo was dated January 25, 1982, the other officers at Unichem did not receive the memo until early March.

On February 9, 1982, Gurtler contacted the First National Bank of Dolton for the purpose of obtaining, and guaranteeing, a $100,000 loan. The proceeds of the loan were not for Gurtler himself, but were instead to be disbursed to G.B. Gurtler. Gurtler used his own residence as collateral for the loan and discussed with the loan officer the type of business that G.B. Gurtler was going in to. Subsequently, on April 9, 1982, the loan was granted and the proceeds deposited into the account of Gurtler Chemicals. Gurtler never disclosed to Unichem's other officers that he was attempting to obtain a loan for the rival business established by his son.

During February of 1982 Gurtler became aware that his wife and G.B. Gurtler were soliciting Unichem employees in an attempt to encourage those employees to leave Unichem and join Gurtler Chemicals. In addition, Gurtler knew that his wife had taken several of Unichem's labels and was using those labels to make Gurtler Chemicals' labels. The Gurtler Chemicals' labels created by Gurtler's wife were duplicates of Unichem's labels. (See section II.) Moreover, Gurtler admitted that he provided "technical input" to his wife while she was developing the labels for Gurtler Chemicals. Gurtler did not inform any of Unichem's other officers as to these developments.

On Friday, March 12, 1982, Gurtler resigned from his position as president and director of Unichem. On Monday, March 15, 1982, Gurtler assumed the position of president and director of Gurtler Chemicals, thereby joining his son and wife in their endeavor. In addition, on that Monday, eight of Unichem's other employees failed to report to work at Unichem and instead became immediately employed with Gurtler Chemicals.

On March 18, 1982, Unichem filed a complaint alleging that Gurtler had breached his fiduciary duty. Subsequently, on April 21, 1982, Unichem amended its complaint to include a count against Gurtler Chemicals alleging that Gurtler Chemicals had violated the Uniform Deceptive Trade Practices Act. On April 27, 1982, the circuit court of Cook County entered an agreed order whereby Gurtler Chemicals was: (1) restrained from selling any product that had a Unichem label on it; (2) restrained from selling any product with the same or similar name as that used by Unichem; and (3) compelled to execute certain UCC financing and security agreements to protect Gurtler Chemicals' assets should a judgment in favor of Unichem be rendered.

Unichem moved for summary judgment on June 8, 1982. Unichem claimed that the evidence before the trial court was sufficient to establish that Gurtler breached his fiduciary duty as a matter of law. In addition, Unichem asserted that the uncontradicted evidence demonstrated that Gurtler Chemicals violated the Uniform Deceptive Trade Practices Act as a matter of law.

On September 8, 1982, the trial court agreed with Unichem and entered its summary judgment with regard to both the fiduciary-duty count and the count alleging Gurtler Chemicals' violation of the Uniform Deceptive Trade Practices Act. Soon thereafter, on November 9, 1982, the trial court ordered an accounting. In addition, the trial court awarded Unichem $1,050.50 in attorney fees stemming from Gurtler Chemicals' failure to comply with the trial court's April 27, 1982, order. The attorney fees were granted because Gurtler Chemicals had failed to execute, pursuant to the trial court's order, certain UCC financing and security agreements.

The trial court conducted approximately 25 hearings regarding the accounting. Finally, nearly two years later, the court awarded Unichem $47,964.80. The trial court arrived at this figure through the following analysis: First, the trial court ascertained the total amount of sales that Gurtler Chemicals received at the expense of Unichem (80% of Gurtler Chemicals' sales were to former Unichem customers). That figure amounted to $172,072.40. Second, the trial court determined, pursuant to Gurtler Chemicals' admission, that the total cost of those goods amounts to $141,342.33. Third, based on the evidence presented by the parties, the trial court found that Unichem would have incurred $8,500 in operating expenses had they sold the goods themselves. The trial court then took the gross-sales figure ($172,072.40), and subtracted from it the cost of the goods sold ...


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