Opinion ID: 752950
Heading Depth: 3
Heading Rank: 3

Heading: Salvo's Alleged Double Dealing

Text: 19 While these negotiations with Yamaguchi concerning the new distribution agreement proceeded, Hannex restructured the United States distribution operation. Salvo agreed to become Hannex's vice president of sales and marketing on April 1, 1988. He signed a letter agreement giving him an incentive bonus, terminating a management agreement between Hannex and Graflex, and reiterating a non-compete clause he had previously signed. 20 Hannex alleges that, around this time, Salvo surreptitiously began helping GMI, a competitor in the photographic equipment business, wrest S & S Japan's distribution business away from Hannex. GMI had been purchased by financiers in early 1988 and was looking for new product lines to enter. GMI pursued the idea of obtaining distribution rights in S & S Japan's products, and, to this end, offered to purchase Hannex. In May and June 1988, representatives of GMI communicated with Bernard concerning the terms of a possible deal. Jack Hannes initially expressed some interest in the proposals, but did not authorize anyone at Hannex to negotiate with GMI. After the July meeting with Yamaguchi in Australia, Jack Hannes told Gallen, the president of GMI, that he was not interested in discussing any proposed purchase of Hannex until October, at a trade show in Germany. Jack Hannes requested that GMI not meet with Yamaguchi in the meantime. 21 In response to Yamaguchi's request for a release from S & S USA at the July 1988 meeting in Australia, Martin Hannes faxed a proposed consent to Salvo and requested that he sign it and fax it back to him. Approximately three days later, Salvo returned the executed consent to the Hanneses. In the interim, unbeknownst to the Hanneses, Salvo spoke to both Gallen and Yamaguchi. On the evening of July 28, Salvo spoke to Gallen by phone for sixteen minutes and spoke to Yamaguchi by phone at his hotel room in Australia for over thirty minutes. Salvo spoke to Yamaguchi again by phone on July 31, just before the Hanneses telefaxed the executed consent to Yamaguchi in Japan. When Yamaguchi received the consent, Yamaguchi told Martin Hannes that the document was incomplete because it was missing a line for his signature. 22 In response, the Hanneses instructed Salvo to prepare and execute a new release. Salvo did not provide the revised release to the Hanneses for another two weeks. In the interim, Salvo again met with and spoke to representatives of GMI several times, and planned to join Gallen on a trip to Japan to meet with Yamaguchi. The trip was to be paid for by GMI. Salvo deceived the Hanneses about the nature of the trip, telling Martin Hannes that he was using frequent flier miles to vacation in Japan. When Jack Hannes separately warned Salvo and Gallen that he opposed any meeting between them and Yamaguchi, Salvo cancelled the trip. Gallen went anyway, and met with Yamaguchi. Salvo also lied to Jack Hannes about the reasons for cancelling the trip, telling him that his frequent flier miles were not valid for the month of August. 23 During the period from April to October 1988, Salvo met with Gallen at least four times and met with Brockway four or five times. He also spoke with them on the phone numerous times. The Hanneses were not aware of and did not authorize any of these contacts. Salvo continued to meet secretly with GMI representatives, even after being told not to communicate with Gallen, and after Jack Hannes informed Gallen that he was not interested in selling Hannex. Salvo also consulted repeatedly with GMI's attorneys and his own attorney, at GMI's expense, concerning the validity of his non-compete agreement with Hannex. In connection with these consultations, Salvo sent GMI's attorneys a letter, attaching documents to demonstrate that the Hanneses were undermining his authority. He also sent to GMI and its attorneys internal Hannex documents indicating that the proposed 1988 distribution agreement had not been signed by Yamaguchi. Around this time, GMI also assured Yamaguchi that if GMI obtained S & S Japan's business, Salvo would be offered a job. 24 In late August 1988, after the meeting between Gallen and Yamaguchi in Japan, Yamaguchi agreed to fly to New York to meet with GMI. Prior to this meeting, and after learning that Bernard had left Hannex, Yamaguchi sent a telefax to Jack and Martin Hannes indicating, for the first time, his reluctance to sign the proposed distribution agreement. Yamaguchi stated that he needed to reevaluate the proposed agreement in light of the growing disharmony between the parties handling the distribution effort in the United States Before Bernard left Hannex, Yamaguchi had expressed his concern that Salvo and the Hanneses did not have a good working relationship. Yamaguchi also made it clear in the telefax that he wanted Salvo and Bernard involved in the United States distribution business. Yamaguchi further told the Hanneses in the telefax that he would be traveling in Europe until September. He did not, however, inform them of his plans to meet with GMI, Salvo and Bernard in New York. 25 Salvo and Bernard both attended the September meeting in New York between GMI and Yamaguchi. Salvo sent a note to Martin Hannes to conceal his whereabouts during this time, stating that he was attending a seminar in Tampa, Florida. On the day of the New York meeting, Jack Hannes telefaxed a letter to Salvo in Florida, for Salvo's signature, which urged Yamaguchi to sign the proposed distribution agreement. Salvo declined to sign it, telling Jack Hannes that he would prefer to speak to Yamaguchi directly. In response to Salvo's refusal to sign, Jack Hannes sent Salvo a strongly worded reply reminding him of his fiduciary duties, instructing him to use his best efforts to get Yamaguchi to sign the agreement, and telling him not to talk to GMI. Upon receipt of this reply, Salvo faxed the document to Gallen. Gallen, in turn, faxed it to another GMI representative with the message URGENT--Please show this to Paul Hartnett [GMI's attorney] at once. Are we in a position to advise Larry Salvo what to do? Please respond quickly. 26 Nine days after the September meeting in New York, GMI's attorneys sent Yamaguchi a draft of a proposed distribution agreement. The draft agreement provided that GMI would be appointed the exclusive distributor of S & S Japan's products in the United States The cover letter to the draft, which GMI's attorneys prepared, stated that any agreement would not be executed until an arrangement could be worked out with the Hanneses. It also stated, falsely, that such discussions are proceeding. Hannex alleges that the letter was intended to be falsely exculpatory and therefore shows GMI's consciousness of wrongdoing. 27 In October 1988, at a trade show in Germany, Jack Hannes met with Gallen and Brockway for the first time. They offered to buy Hannex from him, but the parties were far apart on price. According to Jack Hannes, the negotiations ceased, partly because he did not like GMI's offer and partly because Brockway told him that he knew Hannex did not have a contract with S & S Japan. When Brockway informed Jack Hannes that he knew Hannex had no contract with S & S Japan, Jack Hannes abruptly told him to leave. 28 Soon after, after discovering that Salvo was conducting business without his authorization, Jack Hannes fired Salvo. The Hanneses informed Yamaguchi of the firing immediately. When Gallen found out about the firing from Salvo, he sent a telefax to Yamaguchi. Gallen told Yamaguchi that the Hanneses had attacked Salvo when he tried to leave Hannex's Florida office with personal belongings, and that Jack Hannes had cancelled the non-competition agreement by firing Salvo. Gallen also stated that now Maybe [S & S Japan], Larry Salvo, and GMI can move quickly to organize new and strong sales efforts in USA. 29 After receipt of Gallen's telefax, Yamaguchi agreed to terminate the Hannex distributorship and to sign an agreement granting GMI exclusive distribution rights. Yamaguchi insisted, however, that GMI agree to indemnify him for any suit brought by the Hanneses. In demanding the indemnification clause, Yamaguchi pointed out that although Jack Hannes did not have a contract with S & S Japan, [t]he fact is he has invested nearly $400,000 in this business.... What would you do if you would have spent this much money and done business without major hitch, yet been told 'no more supplies' when we can see no major errors on your part? 30 In response to this turn of events, Hannex sued Salvo in Florida state court, seeking a preliminary injunction to prevent Salvo from working for GMI. Salvo was represented by GMI's attorneys in this suit. The state court denied the motion for a preliminary injunction.