Opinion ID: 409686
Heading Depth: 1
Heading Rank: 1

Heading: Events Leading to this Litigation

Text: 4 Regal began its existence in 1955 as a Chicago firm that manufactured steel tubing for use in heavy equipment, cargo vehicles, and construction. From 1955 to 1968 Regal was a wholly-owned subsidiary of C.E. Robinson Company headed by a gentleman bearing that name; in 1968 Regal was sold to and became an unincorporated division of Lear Siegler, Inc., a California-based manufacturing concern. David Grohne came to Regal in 1959, rose to become its Vice President and General Manager by 1968, and stayed on as President of the division after Regal was sold to Lear Siegler. 5 In 1972 Copperweld purchased the Regal division from Lear Siegler for Regal's book value plus $3 million. The sale agreement bound Lear Siegler not to compete with Regal, or to allow any subsidiary it controlled to do so, anywhere in the United States for five years. After the sale Copperweld transferred all Regal's assets to a newly formed Pennsylvania corporation again named Regal Tube Company. Thus Regal was once again a corporation, rather than a division, but it was wholly owned by Copperweld. It continued to conduct all its manufacturing operations in Chicago, although it shared corporate headquarters in Pittsburgh with Copperweld. 6 As the sale of Regal to Copperweld was being negotiated, David Grohne was considering his options. By the time the sale was consummated, Grohne had accepted a job as Lear Siegler's Corporate Secretary, a position he held from February to July 1972. From July to September he continued to work for Lear Siegler, finishing various projects. Throughout this period, Grohne was also actively pursuing the possibility of establishing his own steel tubing business. In the spring of 1972 he presented a financing proposal to the Continental Illinois National Bank in Chicago and lined up several dozen investors. In May 1972 Independence was incorporated and sought bids on tubing mills from manufacturers. By late October Independence had a firm offer from Yoder of Cleveland, Ohio, and in December 1972 it gave Yoder a purchase order which called for the delivery of the mill by the end of December 1973. 7 Bedford Foster, Regal's General Manager, and Phillip Smith, Copperweld's Chairman and Chief Executive Officer, learned of Grohne's plans in the winter of 1972-1973. Their first thought was that the non-competition agreement Lear Siegler had signed when it sold Regal ought to prevent Grohne's entrepreneurial efforts. Defendants' lawyer, however, advised them that it did not, though he thought it might be possible to obtain an injunction against Grohne's activities if and when he made use of any of the know-how, technical information, designs, plans, drawings, trade secrets or inventions of Regal, all of which Copperweld had purchased from Lear Siegler. In February 1973 the lawyer furnished Smith and Foster with a letter to be sent to anybody with whom Grohne tried to deal. The letter warned that Copperweld was greatly concerned if (Grohne) contemplates entering the structural tube market    in competition with Regal Tube and vowed to take any and all steps which are necessary to protect our rights under the terms of our purchase agreement and to protect the know-how, trade secrets, etc., which we purchased from Lear Siegler. 8 Copperweld's stated rationale for this letter was to prevent third parties from developing reliance interests in dealings with Grohne that might later make a court reluctant to enjoin Grohne's activities at Copperweld's behest. Its actual effect was much simpler: it made Yoder, which had accepted Grohne's purchase order for the tube mill on February 19, 1973, void the acceptance two days later, when it received Copperweld's February 19th missive. Despite Independence's efforts to piece the Yoder deal back together again, Yoder made a final decision to cancel in March 1973. Thereafter Independence opened negotiations with Abbey Etna Machine Company, which finally agreed to ship Independence the necessary tube mill between April and September 1974. Although Abbey also received one of Copperweld's warning letters, it performed its agreement with Grohne. Independence Tube Corporation commenced operations on September 13, 1974-nine months later than it could have if Yoder had delivered the tube mill as originally agreed. 9 Among the employees of Independence were eight former employees of Regal, whom Grohne hired after he had a commitment from Abbey and before Independence actually commenced business. Zbigniew Uzarowicz, Regal's plant manager, joined Independence in October 1973. Antanas Janonis, Regal's plant engineer, also went to Independence soon thereafter. Grohne subsequently hired six additional Regal employees-a vice president, two plant foremen, the office manager, a regional sales manager, and a salesperson. Regal and Copperweld viewed Grohne's recruitment as posing two threats: luring away key Regal employees and obtaining Regal's proprietary information and know-how from them. 10 In 1976 Independence filed this suit in federal district court in Chicago against Copperweld, Phillip H. Smith, its Chief Executive Officer, Regal and Yoder. Its amended complaint of May 24, 1977, charged that(1) Copperweld, Regal, Smith, and Yoder had conspired to restrain trade in the market for steel structural tubing, in violation of Section 1 of the Sherman Act (Count I); 11 (2) Copperweld, Regal, and Smith had attempted to monopolize the market for steel tubing, in violation of Section 2 of the Sherman Act (Count II); 12 (3) Yoder had breached its contract to supply a tube mill to Independence (Count III); 13 (4) Copperweld, Regal, and Smith had interfered with Independence's contractual relationship with Yoder and business relationship with Deere Plow & Planter Works (Deere) (Count IV); and 14 (5) Copperweld, Regal, and Smith had slandered and libeled Independence with Deere (Count V). 15 Count VI sought compensatory and punitive damages under all the above theories and preliminary and permanent injunctive relief. 16 Copperweld and Regal denied all Independence's allegations, set forth various affirmative defenses, and filed discursive counterclaims against Independence and Grohne. The defendants alleged that 17 (1) Independence and Grohne used Regal's protectible know-how and confidential or proprietary information in violation of the Lear Siegler agreement and in breach of Grohne's fiduciary duties to Regal; 18 (2) Independence and Grohne competed unfairly by hiring away key Regal employees; and 19 (3) Independence and Grohne interfered with prospective contractual and other business relationships of the defendants by filing their lawsuit on the eve of a $30 million debenture offering by Copperweld. 20 Like the plaintiff, the defendants sought compensatory and punitive damages and preliminary and permanent injunctive relief. 21 Before trial Independence dismissed its monopolization claim (Count II supra ). It also dropped Smith as an individual defendant in all the counts in which he had figured. 22 The liability portion of the case was tried to a jury between November 14, 1980, and February 20, 1981. At the conclusion of the evidence Judge Will directed a verdict against Regal and Copperweld on the issues raised by their counterclaims. The remainder of the case went to the jury on special interrogatories. The jury found that Copperweld and Regal had conspired to violate Section 1 of the Sherman Act, but that Yoder had not been involved in the conspiracy (Count I). It also found Yoder liable for breach of its contract to supply a mill to Independence (Count III). The jury found that Copperweld (but not Regal) had interfered with Independence's contractual relationship with Yoder (Count IV); and that Regal (but not Copperweld) had interfered with Independence's business relationship with Deere (Count IV) and had slandered Independence to Deere (Count V). 23 The damages phase of the trial was concluded on March 6, 1981. Yoder was no longer a party, having settled its liability to Independence under Count III. Judge Will instructed the jury that the damages for the antitrust violation and for the inducement of the Yoder contract breach (Counts I and IV) should be identical and therefore should not be double-counted. The jury then awarded $2,499,009 (trebled to $7,497,027) on the antitrust claim against Copperweld and Regal, and $15,000 against Regal alone on Counts IV and V. Judgment was entered on May 27, 1981. On June 22, 1981, Judge Will handed down a 65-page memorandum opinion denying the defendants' motions for judgment notwithstanding the verdict or a new trial. These appeals followed.