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Polyad Co. v. Indopco Inc.

September 25, 2007

POLYAD COMPANY, AN ILLINOIS COMPANY, PLAINTIFF,
v.
INDOPCO INC., A DELAWARE CORPORATION DOING BUSINESS AS NATIONAL STARCH AND CHEMICAL COMPANY AND TSE INDUSTRIES, INC., A FLORIDA CORPORATION, DEFENDANTS.



The opinion of the court was delivered by: Honorable David H. Coar

MEMORANDUM OPINION AND ORDER

Polyad Company ("Polyad"), an Illinois company, has brought suit in this Court under diversity jurisdiction against TSE Industries, Inc. ("TSE"), a Florida corporation, and Indopco Inc. ("Indopco"), a Delaware corporation doing business as National Starch and Chemical Company. On January 23, 2007, Polyad filed an amended complaint alleging three counts; two counts against Indopco for tortious interference with contract and intentional interference with a business relationship and one count against TSE for breach of contract. Before the Court now are TSE's Motion to Dismiss Count III (breach of contract claim) and Indopco's Motion to Dismiss Count I (tortious interference with a contract claim) pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons stated below, Defendants' motions are GRANTED.

I. BACKGROUND

Polyad is an Illinois corporation with its principal place of business in Cook County, Illinois. It sells specialty polyurethane reactive hot melt adhesives to manufacturers of recreational vehicles ("RV manufacturers"). Indopco is a Delaware corporation with its principal place of business in Bridgewater, New Jersey. It is the dominant seller of polyurethane hot melt adhesives in the United States, including sales to RV manufacturers. Indopco does business in Illinois and sells its products in Cook County, Illinois. TSE is a Florida corporation with its principal place of business in Clearwater, Florida. It is a toll (contract) manufacturer of chemical products, including polyurethane hot melt adhesives, which had a contract to manufacture adhesives for Indopco. TSE does business in Illinois through its representative, Desco, Inc., located in Elk Grove Village, Illinois. TSE manufactured and sold products to Polyad in Illinois.

Between 1990 and 2000, Gerald W. Bornhofen ("Bornhofen") was an employee of Indopco who marketed reactive hot melt adhesives to RV manufacturers. Bornhofen was very successful for Indopco, being responsible for sales of approximately $30 million per year to RV manufacturers. In March 2000, Bornhofen resigned from Indopco. In January 2003, he became an employee of Polyad, selling polyurethane reactive hot melt adhesives. In 2003, Indopco began a campaign to drive Polyad out of the recreational vehicles adhesives business by using their representatives to disparage Polyad's product to RV manufacturers.

In late 2003, Polyad contracted with a toll manufacturer to produce new Polyad reactive hot melt adhesive products to Polyad's specifications. Toll manufacturing is a version of contract manufacturing sometimes used in the specialty chemical industries in which production of specific batches are outsourced to third parties (i.e. toll manufacturers). Using a toll manufacturer to produce Polyad's new adhesives made Polyad more competitive than re-selling private label adhesive because the cost of the toll-manufactured adhesives to Polyad was much lower. In or about May 2004, Polyad entered into negotiations with TSE to toll manufacture Polyad's new adhesives, which resulted in Polyad and TSE entering into an oral requirements contract pursuant to which TSE agreed to manufacture Polyad's requirements for its new adhesives in accordance with Polyad's formulae and specifications and Polyad agreed to exclusively utilize TSE to manufacture the adhesives and pay TSE for the adhesives at the rate of $0.70 per pound plus the cost of raw materials. TSE began performance and manufactured Polyad's new adhesives in accordance with Polyad's specifications and delivered the adhesives to Polyad.

Indopco's campaign to disparage Polyad's products and to interfere with Polyad's relationship with its customers and suppliers consisted of the following incidents:

(a) October, 2003 - Andy Blood and Jason Queen, both Indopco employees, told a representative of Amerimax Building Products that Polyad's product includes urine as a secret ingredient;

(b) November, 2003 - National Starch representatives distributed a tee shirt to Amerimax employees depicting a "Calvin and Hobbs" cartoon character urinating onto a drum of Polyad's product;

(c) April, 2004 - Roger Lumm, an Indopco employee, falsely claimed to a production supervisor at Starcraft RV that Polyad's adhesives infringe upon Indopco's patents;

(d) September, 2004 - John Orloff of Indopco called Tony Rindone of TSE to falsely warn TSE that Polyad's adhesives infringe Indopco's patents and that TSE could potentially be made a defendant in a patent and intellectual property lawsuit; and

(e) October, 2004 - Roger Lumm of National Starch approached Duane VanderWerf of Atwood Mobil Products and falsely claimed that Polyad's adhesives infringe upon Indopo's patents and requested that VanderWerf purchase a five gallon pail of Polyad's product for Indopco for which Indopco would reimburse VanderWerf.

In October, 2004, an Indopco manager called Tony Rindone of TSE and demanded that TSE immediately stop producing product for Polyad. On or about November 1, 2004, TSE informed Polyad that, despite recent threats from Indopco regarding TSE's contractual relationship with Polyad, TSE would continue to produce Polyad's products and that TSE would give Polyad six to eight months' prior notice of any intention to attempt to terminate TSE's business relationship with Polyad. At or about the same time, TSE requested that Polyad provide a forecast of the quantities of a certain raw material used in Polyad's formulae for the next six months in order for TSE to purchase a large enough supply before an expected price increase would take effect.

In early November, 2004, TSE provided pricing information to Polyad to meet Polyad's manufacturing requirements for the following year and beyond. In reliance on TSE's pricing information and assurances that TSE could and would supply all of Polyad's needs for product, Polyad made commitments to and contracts with its customers at fixed prices including entering into a 3 year contract with Coachmen Recreational Vehicles, LLC ("Coachmen"), dated as of November 1, 2004, for Polyad to be the sole supplier of Coachmen's annual requirements of polyurethane hot melt adhesives.

In December, 2004, George Gunia of Indopco visited Coachmen and warned that Polyad would not be able to supply product to Coachmen. In that same month, Indopco contacted Coachmen via e-mail and suggested that in the very near future Polyad would not be able to meet Coachmen's requirements. Indopco was aware of the contract between Polyad and Coachmen prior to sending the e-mail to Coachmen suggesting that Polyad would not be able to meet Coachmen's requirements.

On or about December 3, 2004, TSE orally assured Polyad that TSE would be able to produce Polyad's adhesive products and meet Polyad's volume requirements for 2005. During the same conversation, however, TSE requested that Polyad not compete for any more of Indopco's customers until Indopco renewed its contract with TSE that was due to expire on February 1, 2005. On December 13, 2004, TSE had assured Polyad via e-mail that it would meet Polyad's volume requirements for the coming years. On or about December 20, 2004, ...


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