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03/31/97 HEXACOMB CORPORATION v. CORRUGATED SYSTEMS

March 31, 1997

HEXACOMB CORPORATION, PLAINTIFF-APPELLANT,
v.
CORRUGATED SYSTEMS, INC., HONEYCOMB PRODUCTS CORPORATION, AND DAVID F. MCCARTHY, DEFENDANTS-APPELLEES.



APPEAL FROM THE CIRCUIT COURT COOK COUNTY. No. 95 CH 359. THE HONORABLE ALBERT J. GREEN, JUDGE PRESIDING.

Released for Publication May 12, 1997.

Presiding Justice Cousins delivered the opinion of the court. Gordon and Leavitt, JJ., concur.

The opinion of the court was delivered by: Cousins

PRESIDING JUSTICE COUSINS delivered the opinion of the court:

Plaintiff Hexacomb Corporation (Hexacomb) filed suit seeking preliminary and permanent injunctive relief and replevin for misappropriation of trade secrets and tortious interference with a contractual and business relationship against defendants Corrugated Systems, Inc. (Corrugated), Honeycomb Products Corporation (Honeycomb), and David F. McCarthy (McCarthy). This action followed the conclusion of an action brought by Hexacomb in United States District Court.

Plaintiff appeals from an order in which the trial court dismissed its suit against defendants, denied its motion for summary judgment, and granted defendants' motion for summary judgment. On appeal, plaintiff contends that: (1) the circuit court erred in granting summary judgment for defendants based on the doctrine of collateral estoppel, and (2) the circuit court erred in dismissing all three counts of the complaint against all three of the defendants.

BACKGROUND

Hexacomb is an Illinois corporation in the business of selling honeycomb paper products. One of the honeycomb products manufactured by plaintiff is a double-faced sandwich panel made of a paper honeycomb core. The paper honeycomb core is made on a core-making machine designed and manufactured by plaintiff. The core-making machine is a large machine that is 70 to 80 feet long, about 12 feet tall and 10 feet across.

From 1972 to May 7, 1992, plaintiff employed George T. Wroblewski, Sr. (George Sr.), as its maintenance supervisor. George Sr. was responsible for, among other things, designing and building plaintiff's core-making machines. From 1979 to May 1992, plaintiff also employed George Sr.'s son, George Wroblewski, Jr. (George Jr.), who also worked in plaintiff's maintenance department and performed maintenance on plaintiff's core-making machines.

In or about September 1986, plaintiff employed defendant David F. McCarthy (McCarthy) as plaintiff's director of sales. In April 1992, George Sr. left plaintiff to start GTW Enterprises, Inc. (GTW). Shortly thereafter, George Jr. and Andrew Wroblewski, another one of George's sons, left plaintiff and joined GTW. In or about September 1992, plaintiff terminated McCarthy.

In or about January 1993, McCarthy contacted American Honeycomb, Inc. (American Honeycomb), a third company, to ascertain whether it might be interested in purchasing a core-making machine and a panel line from GTW. In February 1993, McCarthy entered into negotiations with GTW for the purpose of purchasing a core-making machine and panel line from GTW for American Honeycomb. Plaintiff discovered that George Sr. was building core-making machines at GTW, and on May 24, 1993, filed suit against George Sr. and GTW in the United States District Court for alleged misappropriation of plaintiff's trade secrets. Plaintiff also moved for a preliminary injunction and temporary restraining order to prevent George Sr. and GTW from building and selling core-making machines. After a hearing, plaintiff's motion was denied on May 25, 1993.

Meanwhile, sometime during the summer of 1993, McCarthy contacted defendant Corrugated to ascertain whether Corrugated might be interested in purchasing a core-making machine and panel line from GTW. McCarthy then contacted George Sr. to obtain a quote for the construction of a core-making machine and panel line for Corrugated. On August 23, 1993, Corrugated submitted a purchase order to GTW for a core-making machine and panel line along with a $50,000 deposit check.

Plaintiff continued to pursue preliminary injunctive relief against George Sr. and GTW. Following a seven-day hearing, the federal court denied plaintiff's motion for preliminary injunctive relief on September 8, 1993. The court denied plaintiff's motion because it found that plaintiff had failed to reasonably protect its secret as required by the Illinois Trade Secrets Act (765 ILCS 1065 et seq. (West 1992)). However, subsequent to that ruling, plaintiff located a series of confidentiality agreements executed by George Sr. while employed by plaintiff's predecessor companies. Based on this evidence, the court reversed its previous ruling and granted plaintiff's motion for preliminary injunctive relief. On October 8, 1993, the federal court orally informed counsel for the parties that it was granting plaintiff a preliminary injunction against George Sr. and GTW.

In October 1993, McCarthy, along with several officers from Corrugated, incorporated defendant Honeycomb Products Corporation (Honeycomb), for the purpose of selling honeycomb paper products. Honeycomb Products operates out of the same location as Corrugated and is owned by David F. McCarthy, Tom Hamilton, Corrugated's vice-president, Robert Sisco, Corrugated's president, Thomas Ottenhoff, Corrugated's accountant, and Bill Bontekoe.

In mid October 1993, George Sr. contacted Tom Hamilton at Corrugated and told him that GTW could not finish the core-making machine in time because of the litigation with plaintiff. At about that time, George Jr. and other GTW employees then went to work for Corrugated and commenced building a core machine for Corrugated.

On October 28, 1993, the federal court entered its order granting plaintiff's preliminary injunction, which prohibited GTW from building or selling only core-making machines.

In November 1993, George Jr., Andrew Wroblewski, and three other GTW employees were released from GTW and immediately hired by Corrugated to complete the core-making machine that GTW had been building for Corrugated. In addition, GTW sold to Corrugated the parts that GTW had ordered to build Corrugated's core-making machine.

In January 1994, plaintiff put Corrugated and McCarthy on notice of the federal action and October 28, 1993, preliminary injunction. On February 1, 1994, plaintiff filed a motion for a rule to show cause why GTW, George Sr., George Jr., Andrew Wroblewski and Corrugated should not be held in contempt of the October 28, 1993, preliminary injunction order. On February 2, 1994, an order to show cause was issued. On May 6, 1994, Corrugated filed a motion to intervene as a defendant to contest ...


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