Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Acoustical Surfaces, Inc. v. Vertetek Corporation

United States District Court, N.D. Illinois, Eastern Division

April 8, 2014

ACOUSTICAL SURFACES, INC., a Minnesota corporation, Plaintiff,
v.
VERTETEK CORPORATION, ET AL., Defendants.

MEMORANDUM OPINION AND ORDER

ROBERT M. DOW, Jr., District Judge.

This matter is before the Court on two motions: (1) a motion for a more definite statement and to dismiss filed by Defendants Vertetek Corporation, Richard Pulciani, Timm Rucinski, and Antonio Belmonte (collectively "Vertetek Defendants") [27]; and (2) a motion to dismiss filed by Defendants 360 Coatings, LLC and David Rairick ("360 Defendants") [29]. For the reasons set forth below, the Court grants in part and denies in part the Vertetek Defendants' motion to dismiss [27] and grants in part and denies in part the 360 Defendants' motion to dismiss [29]. The Court denies the Vertetek Defendants' motion for a more definite statement [27]. Counts 6 and 7 are dismissed as to Defendants Richard Pulciani, Timm Rucinski, and Antonio Belmonte, and Count 5 is dismissed as to Defendant David Rairick. All other claims survive Defendants' motions to dismiss.

I. Background[1]

Plaintiff is a Minnesota corporation, located in Minnesota, which markets and sells acoustical and architectural products in the United States. Defendant Vertetek is an Illinois corporation located in Illinois, which makes a paint product called "Coat of Silence, " an acoustical, sound-reduction paint applied to interior and exterior surfaces. Individual Defendants Pulciani, Rucinski, and Belmonte are Illinois or Indiana residents, and officers or agents of Vertetek. Defendant 360 Coatings, LLC is a Wyoming limited liability company located in Florida, and Rairick, a North Carolina resident, is 360's sole member and president. 360 distributes Vertetek's paint products throughout the U.S.

A. The February 2012 Agreement between Vertetek and Acoustical

On February 20, 2012, Acoustical and Vertetek entered into an exclusive distribution agreement. Prior to this agreement, Vertetek had not effectively marketed or sold its Coat of Silence product, either by itself or through a distributor, and thus had little or no market recognition or customer demand for that product. Under the agreement, Acoustical was to be Vertetek's exclusive distributor of "Manufacturer's Products" in North America, Eastern Europe, and the Middle East. "Manufacturer's Products" meant Vertetek's "complete range of products manufactured and sold by [Vertetek] for interior and exterior applications for acoustical and vibration control purposes * * *." The agreement was for an initial term of five years, unless terminated earlier in accordance with the agreement. The final signed agreement provided that Acoustical would purchase a minimum of $500, 000 of product in the first two years, and a minimum of $400, 000 in each of the third through fifth years. The agreement prices were $46.00 per gallon for base paint, and $56.00 per gallon for enhanced paint (with a class A fire-retardant additive).

The agreement contained a number of marketing, purchase, and resale requirements for Acoustical, as well as certain termination provisions. If Acoustical failed to meet its annual purchase quotas under section 8 of the agreement, Vertetek had the option to terminate the agreement upon advance written notice. Acoustical could cure the shortfall within 30 days after receiving the notice. The agreement also was terminable by either party "in the event of a significant and material breach, " or "serious misconduct * * * clearly detrimental to its best interests" by the other party. Such termination required 30 days written notice with an opportunity to cure.

B. The April 2012 Agreement between Vertetek and 360

On April 10, 2012, Vertetek and 360 entered into the Private Label and Supply Agreement. This agreement granted rights to 360, for an initial term of three years, to purchase, market, and resell "Vertetek Products" in the United States under 360's "Private Labels." "Vertetek Products" meant "Vertetek's complete range of paint and coating products * * * including all products traded under Coat of Silence Coatings * * * for interior and exterior applications for acoustical and vibration control purposes * * *." 360 agreed not to promote or sell those products under any other name other than its Private Labels. The agreement required 360 to purchase a minimum of $1 million of product each year. The agreement price was $56.00 per gallon.

Plaintiff alleges in the complaint that this agreement "required the parties to keep and maintain all aspects of their contractual relationship confidential"; however, the agreement itself, which is attached to the complaint, defined the restricted "Confidential Information" only as the parties' non-public business information and carved out of the "Confidential Information" definition any information in the public domain or already known to the recipient, independent of disclosure by the other party.

According to Plaintiff, the agreement established 360 "as a direct competitor of Acoustical" because it allowed 360 to sell "identical Vertetek Products under a different brand name throughout Acoustical's core market." Plaintiff alleged "upon information and belief" that 360 knew or should have known that Acoustical was Vertetek's exclusive distributor, but 360 nevertheless signed the April 2012 agreement "without regard for Acoustical's existing distribution rights." Plaintiff did not allege any specific fact or circumstance regarding 360's or Rairick's awareness, prior to signing the April 2012 agreement, that Acoustical was Vertetek's exclusive distributor. Nor does Acoustical allege anywhere in its complaint that 360 or Rairick ever knew there was a signed written agreement between Acoustical and Vertetek, or that 360 or Rairick ever saw that agreement.

C. Post-Agreement Dealings Between the Parties

On April 25, 2012, Acoustical learned, and Vertetek confirmed, that 360 was selling Coat of Silence under the "Serenity Paint" private label. Acoustical told Vertetek that its agreement with 360 was a "in direct contravention of the Acoustical Agreement" and that any sales to 360 amounted to a breach of their agreement. Several subsequent conference calls between Acoustical and Vertetek did not resolve the issue. On May 15, 2012, Vertetek sent to Acoustical a proposed memorandum of understanding, under which Acoustical would agree that the 360-Vertetek agreement would not breach the Acoustical agreement. Acoustical refused, and demanded a copy of the 360-Vertetek agreement. Vertetek refused, citing confidentiality. But on June 4th, when Vertetek invited Acoustical and 360 to Chicago to talk about their situation, Vertetek sent to Acoustical a copy of the signed agreement with 360.

As a result of the ensuing June 13th meeting in Chicago, the parties "agreed" that (i) 360 was required to purchase Vertetek products from Acoustical, (ii) 360 could not sell the products to subdistributors or resellers, but only to end users, (iii) 360's labels would contain a "Coat of Silence" tag line, (iv) Acoustical and 360 would negotiate a private-label supply agreement, which when finalized would be sent to Vertetek for approval, and (v) Vertetek would provide a discount on products sold to Acoustical for resale to 360. The complaint does not allege any written memorialization of this agreement. However, after the meeting, Acoustical and Vertetek negotiated discounts for product purchased for 360, Acoustical sent a draft agreement to 360, and Acoustical's marketing staff discussed ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.