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Foodcomm International v. Barry

November 14, 2006

FOODCOMM INTERNATIONAL, PLAINTIFF,
v.
PATRICK JAMES BARRY, CHRISTOPHER PAUL LEACY, AND OUTBACK IMPORTS, INC., AND EMPIRE BEEF COMPANY, INC., DEFENDANTS.



The opinion of the court was delivered by: Samuel Der-yeghiayan, District Judge

MEMORANDUM OPINION

This matter is before the court on Plaintiff Foodcomm International's ("Foodcomm") partial motion for summary judgment and on Defendants' partial motion for summary judgment. For the reasons stated below, we deny both motions for summary judgment in their entirety.

BACKGROUND

Foodcomm alleges that in 1999 it hired Defendant Christopher Paul Leacy ("Leacy") to become its sales manager for the purchase and sale of Australian chilled beef in the United States. Foodcomm also contends that it hired Defendant Patrick James Barry ("Barry") as a salesperson to assist Leacy. According to Foodcomm, as the work of Leacy and Barry progressed, they became more intricately involved in the dealings of Foodcomm and the level of their responsibilities expanded. In April 2001, Defendant Empire Beef Company, Inc. ("Empire") allegedly sent representatives to meet with Foodcomm representatives to discuss a redistribution agreement between Foodcomm and Empire ("Redistribution Agreement"). Foodcomm and Empire allegedly engaged in a series of negotiations concerning the Redistribution Agreement and Leacy and Barry were allegedly intimately involved in the negotiations. According to Foodcomm, in March of 2002, representatives of Empire became upset by a Foodcomm proposal and Leacy was sent to smooth over the problems with Empire. Foodcomm contends that while Leacy and Barry were still employed for Foodcomm they were secretly discussing doing business with Empire in Leacy's and Barry's own business, Defendant Outback Imports, Inc. ("Outback"), that Leacy and Barry were secretly putting in place. Specifically, Foodcomm claims that Leacy and Barry conspired to present Empire "with a business plan to create, Outback Imports, Inc., an Empire Beef-owned entity that would provide the same services as were already being provided by Foodcomm, and directly compete with Foodcomm." (Mem. FSJ 3-4). Foodcomm alleges that in July and August 2002, Barry began taking absences from work at Foodcomm and he resigned on August 29, 2002. Leacy allegedly then resigned on August 30, 2002. Foodcomm claims that Leacy and Barry were disloyal to Foodcomm by planning their new business and interfering with the relationship between Foodcomm and Empire while Leacy and Barry continued to receive a salary from Foodcomm. Foodcomm's amended complaint includes a breach of fiduciary duty claim brought against Barry (Count I), a breach of fiduciary duty claim brought against Leacy (Count II), a breach of contract claim brought against Leacy (Count III), a constructive trust and unjust enrichment claim brought against Outback (Count IV), a civil conspiracy claim brought against all Defendants (Count V), and a constructive trust and unjust enrichment claim brought against Empire (Count VI).

Foodcomm now moves for summary judgment on the breach of fiduciary duty claims (Counts I and II) and on the civil conspiracy claim (Count V). Defendants have moved for summary judgment on the constructive trust and unjust enrichment claim brought against Outback (Count IV), the civil conspiracy claim to the extent that it is brought against Empire and Outback (Count V), and the constructive trust and unjust enrichment claim brought against Empire (Count VI). Defendants also move for summary judgment on the issue of damages resulting from lost profits.

LEGAL STANDARD

Summary judgment is appropriate when the record, viewed in the light most favorable to the non-moving party, reveals that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). In seeking a grant of summary judgment the moving party must identify "those portions of 'the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)(quoting Fed. R. Civ. P. 56(c)). This initial burden may be satisfied by presenting specific evidence on a particular issue or by pointing out "an absence of evidence to support the non-moving party's case." Id. at 325. Once the movant has met this burden, the non-moving party cannot simply rest on the allegations in the pleadings, but, "by affidavits or as otherwise provided for in [Rule 56], must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e). A "genuine issue" in the context of a motion for summary judgment is not simply a "metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th Cir. 2000). The court must consider the record as a whole, in a light most favorable to the non-moving party, and draw all reasonable inferences that favor the non-moving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d 969, 972 (7th Cir. 2000). When there are cross motions for summary judgment, the court should "construe the evidence and all reasonable inferences in favor of the party against whom the motion under consideration is made." Premcor USA, Inc. v. American Home Assurance Co., 400 F.3d 523, 526-27 (7th Cir.2005).

DISCUSSION

I. Breach of Fiduciary Duty Claims (Counts I and II)

Foodcomm moves for summary judgment on the breach of fiduciary duty claims (Counts I and II).

A. Choice of Law for Breach of Fiduciary Duty Claims

Although Defendants make certain references to California state law in their answer to Foodcomm's motion for summary judgment, Illinois law clearly applies to the breach of fiduciary duty claims in this action. Such a determination has already been made in this action by the Seventh Circuit in Foodcomm Int'l. v. Barry, 328 F.3d 300 (7th Cir. 2003). Id. at 304. After this court entered a preliminary injunction in this case, Defendants appealed the ruling and the Seventh Circuit affirmed this court's ruling in Foodcomm. Id. at 303. The Court in Foodcomm noted that "[t]he parties implicitly agree that Illinois law applies to Foodcomm's claims." Id. The Court also applied Illinois law when determining whether Barry and Leacy were fiduciaries and whether they violated their fiduciary duties. Id. at 304. Thus, Illinois law applies to the breach of fiduciary duty claims in this action.

B. Whether Barry and Leacy were Fiduciaries

Foodcomm argues that there is conclusive evidence that shows that Barry and Leacy were fiduciaries of Foodcomm.

1. Whether Prior Ruling Resolved Issue

Foodcomm argues that the Court in Foodcomm,has already found that Leacy and Barry were fiduciaries of Foodcomm. In Foodcomm the Court addressed Defendants' argument that Barry and Leacy were not fiduciaries and the Court stated: "We disagree." Id. In support of its conclusion, the Court pointed to pieces of evidence that indicate that Barry and Leacy were fiduciaries of Foodcomm and the Court concluded by stating: "These are the hallmarks of a fiduciary, and employees, as agents of their employer, do not fall outside the purview of a breach of fiduciary duties." Id. Defendants contend that the statements made by the Court in Foodcomm were merely based upon the record before the Court at that juncture, and were not intended to bind the parties or this court at the summary judgment stage.

The Seventh Circuit has indicated that "[a] court must be cautious in adopting findings and conclusions from the preliminary injunction stage in ruling on a motion for summary judgment . . . .'" Thomas & Betts Corp. v. Panduit Corp., 138 F.3d 277, 291-92 (7th Cir. 1998)(noting that "findings of fact and conclusions of law made at the preliminary injunction stage are often based on incomplete evidence and a hurried consideration of the issues; and second, different standards apply in the two contexts (reasonable likelihood of success on an injunction, and the existence of any genuine issues of material fact on summary judgment)"). In the instant action, the Court in Foodcomm did not specifically state that its conclusion that Barry and Leacy were fiduciaries was a preliminary finding, but the context of the statements by the Court indicates that its conclusion was only a preliminary finding. For example, in Foodcomm,the Court made clear that it was not ruling on the merits of Foodcomm's claims by stating that it was applying the legal standard for a preliminary injunction determination. 328 F.3d at 303. Also, immediately after the Court discussed whether Barry and Leacy were fiduciaries, the Court made several references to the fact that the Court was ruling based upon "evidence adduced at the [preliminary injunction] hearing" and that certain facts appeared to support Foodcomm's positions "if proved at trial." Id. There is no clear statement by the Court in Foodcomm indicating that it intended to depart from the general principal regarding preliminary injunction findings and to bind the court and parties at the summary judgment stage in regards to whether Leacy and Barry were fiduciaries of Foodcomm. Thus, we conclude that the Seventh Circuit did not bar the parties from addressing this issue at the summary judgment stage.

2. Evidence of a Fiduciary Relationship

Foodcomm argues that the evidence overwhelmingly shows that Barry and Leacy were fiduciaries of Foodcomm. Under Illinois law, a plaintiff bringing a breach of fiduciary duty claim bears "[t]he burden of proving the existence of a fiduciary relationship . . . ." In re Rothenberg, 530 N.E.2d 1148, 1150 (Ill. App. Ct. 1988). A fiduciary relationship may: 1) "be presumed from the relationship of the parties, such as in an attorney-client relationship," or 2) "arise from the facts of particular situation, for example, where there is trust reposed on one side and resulting superiority and influence on the other." Id. If a fiduciary relationship is not presumed as a matter of law "the facts from which such a relationship arises must be proved by clear and convincing evidence." Id.

In Foodcomm the court noted that, based upon the record before it at that juncture, Barry and Leacy appeared to have "had exclusive charge over all of Foodcomm's purchasing of Australian chilled beef, and their job descriptions at Foodcomm involved significant autonomy and discretion." 328 F.3d at 304. The Court in Foodcomm also noted that "Barry and Leacy were two of Foodcomm's highest paid employees . . . ." Id.

a. Salaries

Foodcomm argues that, apart from the owners of Foodcomm, Leacy and Barry were Foodcomm's highest paid employees. Defendants deny in part Foodcomm's assertion. Defendants cite a chart of Foodcomm employees' salaries that indicates that, besides Leacy, in 2002 four other non-owner employees made more money than Barry. (R FSF Par. 38)(R FSF Tab 12). Defendants concede that Leacy was the highest paid employee other than the owners. Thus, whether Barry was one of Foodcomm's highest paid employees is a genuinely disputed fact. Also, the mere fact that Leacy received a high salary is not sufficient to warrant a finding as a matter of ...


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