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Polyad Co. v. Indopco Inc.

September 12, 2008

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



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

MEMORANDUM OPINION AND ORDER

Polyad Company ("Polyad"), an Illinois company, brought suit in this Court under diversity jurisdiction against TSE Industries, Inc. ("TSE"), a Florida corporation, and Indopco Inc. ("National"), a Delaware corporation doing business as National Starch and Chemical Company. On January 23, 2007, Polyad filed an amended three count complaint; 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. In a separate decision dated September 25, 2007, this Court dismissed TSE. Before the Court now is National's Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons stated below, National's motion is GRANTED.

I. UNDISPUTED FACTS

Polyad is an Illinois corporation with its principal place of business in Cook County, Illinois. It sells specialty polyurethane reactive hot melt adhesives ("adhesives") to manufacturers of recreational vehicles ("RV manufacturers"). National is a Delaware corporation with its principal place of business in Bridgewater, New Jersey. It is the dominant seller of adhesives in the United States, including sales to RV manufacturers. National 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 adhesives, and had a written contract (the "supply agreement") to manufacture adhesives for National. TSE manufactured and sold products to Polyad in Illinois.

Between 1990 and 2000, Gerald W. Bornhofen ("Bornhofen") was an employee of National who marketed adhesives to RV manufacturers. At National, Bornhofen was very successful, being responsible for sales of approximately $30 million per year to RV manufacturers. In March 2000, Bornhofen resigned from National. In January 2003, he became an adhesives sales employee of Polyad. Bornhofen purchased a controlling interest in Polyad in April, 2005.

In or about May 2004, Bornhofen and Anthony Rindone ("Rindone"), Vice-President of TSE, began discussions regarding TSE's proposed manufacturing of Polyad adhesives. In June 2004, TSE began to toll manufacture Polyad's adhesives pursuant to an oral agreement reached between the parties (the terms of which Polyad believes to have been reduced to writing through the transmission of emails). According to Bornhofen, Polyad would supply "forecasts" and purchasing orders to TSE and TSE would then provide pricing information and ultimately supply the requested products. On December 20, 2004, TSE informed Polyad that it was stopping production of Polyad's adhesives and would no longer accept purchase orders from them.

National's Communications with TSE Regarding Intellectual Property On August 24, 2004, John Orloff, National's Vice-President of commercial development adhesives, wrote to Rindone and stated "we're doing a careful analysis of [Polyad's] products to see if they're using NSC [National] patented technology." On August 30, 2004, Orloff wrote to Rindone that he "would suggest that you ask them [Polyad] for a letter stating that they are sure that the products they [Polyad] are asking you [TSE] to make don't infringe upon anyone's IP [intellectual property]."

National's Request to TSE to Stop Producing Adhesives for Polyad

Glen Frommer ("Frommer"), National's Business Manager of its Bondmaster Division at all times relevant to this action, was responsible for the sales and marketing of National adhesives in the United States. Frommer supervised George Gunia ("Gunia"), a National sales manager in its Bondmaster Division. Frommer states he became concerned in 2004 that some of Polyad's products made by TSE displayed similar, if not identical packaging to National's products. He discussed these concerns with Rindone. Frommer also states he discussed raw materials shortages and National's supply leverage with Rindone in the second half of 2004. In or around the latter part of October 2004, Frommer requested Rindone to stop manufacturing adhesives for Polyad. (Frommer subsequently denied making this request but the Court will assume that he did for purposes of this motion.) Rindone testified that Frommer made the request because he was upset that Bornhofen allegedly made a claim to a mutual customer of National's and Polyad's that Polyad's adhesives had the same quality, same packaging, and were made by the same toll manufacturer. Upon Bornhofen's denial that he ever made such a claim, Rindone assured Bornhofen that he would continue to supply Polyad. Rindone also stated that he ignored Frommer's request because the only people at National with whom he negotiated and who meant something to him were Orloff and Charlie Call, the General Manager. Rindone stated further that he did not take away TSE's business with Polyad based upon Bornhofen's alleged claims and Frommer's request; he stressed in his testimony that he took away Polyad's supply because he did not have enough raw materials to satisfy all his production needs.

The Market for Raw Materials

Both Polyad and National use methylene diphenyl diisocyanate ("MDI") in their adhesives. MDI comes in at least two forms, monomeric MDI, known as pure MDI, and polymeric MDI, also known as crude MDI. Both parties use monomeric MDI and polyols in their adhesives. During the fourth quarter of 2004 and the first quarter of 2005, Bayer was TSE's principal supplier of monomeric MDI. On November 17, 2004, Dow, a major chemical manufacturer of MDI, informed TSE that due to forces beyond its control, it would not be able to supply TSE with the MDI that it had previously ordered and forecasted and that it would determine an allocation amount based on the amount Dow did available to give to TSE. Two days later, Bayer declared force majeure (meaning forces beyond their control frustrated their ability to perform their supply obligations) regarding its ability to supply MDI and MDI-related products in North America. Approximately one month earlier, two other major suppliers of MDI, BASF and Huntsman, notified its MDI customers of price increases to MDI and polyols and strict allocation amounts of MDI. BASF's procedures would take effect in November 2004 and Huntsman's procedures would take effect in December 2004.

On December 20, 2004, Bayer cancelled two separate shipments of monomeric MDI that was to be delivered to TSE, the first shipment was to be delivered on December 21, 2004 and the second shipment in January. Rindone testified that there were three short periods in December 2004 when TSE did not possess MDI to produce adhesives. However, at no point were National's shipments of adhesives disturbed, although Orloff testified that there were instances in December 2004 when TSE production of National's adhesives were affected.

II. STANDARD OF DECISION

Summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). A genuine issue of material fact exists only if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The movant bears the burden of establishing that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant meets this burden, the non-movant must set forth specific facts (a "scintilla of evidence" is insufficient) demonstrating that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Anderson, 477 U.S. at 252; see also Celotex, 477 U.S. at 324. When reviewing a ...


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