Opinion ID: 551885
Heading Depth: 4
Heading Rank: 2

Heading: Evidence of a Fiduciary Relationship Presented At Trial

Text: 27 General Poly maintains that the alleged fiduciary relationship was formed at the meeting of General Poly and Allied representatives held on January 10, 1979. See Appellee's Br. at 10. However, the jury was instructed that: Plaintiff claims this relationship was formed in late January, 1979, when the parties began to pursue their joint development efforts in confidence and secrecy. Plaintiff contends the written contract signed in September of 1979 merely memorialized the parties' agreement to jointly develop resin and maintain secrecy, but that it did not change the nature of the parties' fiduciary relationship. R. Vol. 2, Doc. 660 (emphasis added). Because there is some discrepancy between the jury instruction and General Poly's position on appeal, we will not restrict ourselves to evidence of the January 10, 1979 meeting. What follows is a representative summary of the evidence presented at trial relating to the question of whether Allied consciously agreed to assume fiduciary obligations to General Poly. 28 Events Prior To The January 10, 1979 Meeting 29 The earliest contact between Allied and anyone involved in General Poly predates the formation of General Poly. Clayton A. Walker, who would later become chairman of the board and treasurer of General Poly, testified that sometime prior to October 10, 1978, he contacted George Jecha, an Allied resin sales representative. R. Vol. 10 at 601. Walker testified that he asked Jecha has Allied got anything, are they moving in any direction in high molecular weight high-density polyethylene and.... George told me yes. He said, as a matter of fact, he was aware, he didn't know exactly where they stood, but he knew that they were definitely interested in looking at developing high molecular weight high-density polyethylene product. Id. A meeting was scheduled in Houston between Allied representatives and Walker and his associates, Hans Traver and Edward Podolak. Id. at 603. 30 On or about October 11-12, 1978, a meeting was held at Traver's home in Houston. Id. Jecha attended the meeting on behalf of Allied, and Walker, Traver, and Podolak represented the then-unincorporated General Poly company. Id. Another Allied representative, technical specialist Pat Snell, was unable to attend the meeting but participated by telephone. Id. Walker testified that he and his associates told George [Jecha] that we had to have a domestic source [of high molecular weight resin] and I further told George without belaboring the issue, that the reason I had called him is that I knew he would, that he would, within the realm of his knowledge, tell me the truth about exactly what Allied was doing. Id. at 605. Traver testified that Jecha did not tell him anything about Allied's plans for high molecular weight (HMW) resin but said that to the best of his knowledge Allied was involved in the Baton Rouge group in developing such a high molecular weight resin; but he did not give me any great details. R. Vol. 24 at 2219. After the meeting, in a letter to Allied's high-density polyethylene (HDPE) national accounts manager, W.D. Singleton, Jecha wrote the following: 31 Having known Bud Walker for so many years and now meeting Hans Traver, there's little doubt in my mind that if they put this new company together, our being in on the ground floor will be of great benefit as this first eight million pound requirement will be a drop in the bucket compared to what they will be using in years to come. My only concern at the moment is whether or not we can put together a suitable sample for the Lima, Peru operation to get this thing started. 32 R. Vol. 9 at 401; Plaintiff's Ex. 99 (First Addendum to Appellant's Br., Doc. 1). 33 In early November of 1978, Allied's technical specialist, Pat Snell, telephoned Traver to discuss HDPE resins. See id. In that conversation, Traver indicated his willingness to offer the PeruPlast plant 1 for testing. R. Vol. 20 at 1478. After the phone conversation with Traver, in a handwritten note drafted on Jecha's memo, Snell stated that [t]his would be a great opportunity to test the B5920F 2 [Solvay resin], test an Allied version of the same, and make an entry into the HDPE film market in the U.S. Plaintiff's Ex. 99 at 2. 34 In November 1978, Walker, Traver, and Podolak met with Allied's Singleton at a trade meeting in Chicago. R. Vol. 10 at 608. Podolak testified that when Traver mentioned to Singleton that the German Hoescht Company soon planned to open a resin plant to produce HMW HDPE in Texas, Singleton replied Allied Chemical will have a product ready before the Germans have that plant up and running. R. Vol. 38 at 4190. According to both Podolak and Traver, Singleton further stated that Allied would sell its HMW resin at one or two cents a pound above the price for injection grade resin, an established HDPE resin. Id.; R. Vol. 24 at 2221. According to Walker, Singleton agreed to arrange a meeting between the promoters and Allied's decision makers. R. Vol. 10 at 609. The January 10, 1979 Meeting 35 A meeting took place at Traver's home in Houston on January 10, 1979. R. Vol. 24 at 2227-28. Traver and Walker represented the new venture--General Poly. Jecha, Singleton, and Snell attended on behalf of Allied, as well as Donald J. Bonin, Allied's vice-president and general manager for HDPE products, and Paul Heath, Allied's HDPE marketing director. Id. at 2228. 36 Walker told the Allied representatives of the planned venture and the need for a domestic supply of HMW resin. R. Vol. 11 at 635. Walker testified that he told Bonin that it was necessary to determine if [Allied] had a high molecular weight high-density poly material that was equal to or better than Hoescht. That was the whole basis of the project. Id. at 647. I told Mr. Bonin that we had to have a domestic source of raw material and that that was essential to our project, that we couldn't, we could not rely on imported material and that was the only material that was available at that point in time. R. Vol. 37 at 3967. According to Walker, Pat Snell and Don Bonin both confirmed that they had been working for some time on a high molecular weight high-density product and that the project was in super shape and they were moving right ahead; that they had anticipated that they would be the first in the business in the United States and that they had a time table and that they were moving toward that time table. Id. at 633. Don Bonin told me and Pat Snell sat there and confirmed that all he had to do to develop that material, they had the reactors, they had just put in a new large reactor in Baton Rouge in anticipation of this and all they had to do was fool with the catalyst--'tinker with the catalyst' were the exact words, and they would have a high molecular weight that was equal to the Hoescht material. Id. at 634; R. Vol. 37 at 3968. 37 Traver testified similarly, recalling that in response to inquiries about the status of Allied's HMW development project Bonin had responded [w]ell we're working on it; we already have a catalyst, now we have to play with that. R. Vol. 24 at 2231. Traver further testified that Bonin said the way it looks today we can have--we expect to have a resin out by the fourth quarter of the year, towards the end of the year. Id. According to Traver, Bonin asked him about General Poly's timetable and he replied after the money had been raised and I was in a position to issue purchase orders, it would take me six months to get the main pieces of equipment in. So it would take, let's say, three months to get the money together.... I could thereby meet the Allied time schedule. Id. at 2231-32. 38 Walker testified that during the January 10 meeting he told Don Bonin that we had to accomplish the hurdle of financing the long-term financing on the equipment and the building and that in order to do that, I had used in the past--had used revenue bond issue as a vehicle to accomplish that financing. And that I anticipated that we would use the same method of financing of the General Poly plant in this case. I asked Don Bonin if Allied would guarantee or preferably buy the bonds on the bond issue as their financial contribution to the joint venture.... Don Bonin's response was that Allied would participate financially in some manner but that ... he would have to visit with his associates ... [and] get back to me as quickly as possible and see what could happen. 39 R. Vol. 11 at 656; see also R. Vol. 8 at 252. 40 At the same meeting, the two groups discussed plans to conduct a test of resin at Traver's plant in Lima, Peru. Walker testified that: 41 I can recall that when Hans [Traver] went over the specifications on the equipment that he had in Peru and the type of equipment, it was German equipment, not any of that equipment available in the United States at that time, and Don Bonin was delighted to find out that that equipment was available and he asked Hans if they could utilize that equipment in some manner to further their technology in testing resins in Peru. Because he pointed out that one of the things they had, they had everything in place, they had everything from a manufacturing standpoint but they had no pilot plant or they had no equipment in their laboratory to actually make film. And that was--the proof of the pudding was to make film. So, he was delighted to find out that Hans had that equipment and Hans made it clear that he would make [available] that equipment and that technology, which included not only equipment, it included trained people, trained personnel, experienced force and technology. 42 R. Vol. 11 at 638. Walker explained that Bonin told Traver that he wanted to use Traver's extrusion technology to test Allied's resins. R. Vol. 11 at 639. Mr. Bonin told me that he wanted to test his material that they had recently run tests and he wanted to test his material to see also if it was equal to the Hoescht material. So that they'd know what they had. R. Vol. 12 at 755. According to Walker, Bonin, Singleton, all of the people said that they had an experimental high molecular weight high-density poly product and they wanted to test it. Id. at 639-40. 43 Traver testified similarly, indicating that the question was whether we could send experimental resins for testing to Lima. R. Vol. 24 at 2232. [Bonin] asked me if he could use our facilities in Lima for that purpose, and I said, 'Well, of course, delighted to, anything to speed the project along'. Id. [H]e wanted to test the Allied resins. He wanted to see how the resins were doing. Id. 44 Other topics of discussion at the January 10 meeting were the quantity of HMW resin which Walker and Traver anticipated General Poly would need from Allied and the price at which Allied would sell HMW resin to General Poly. Traver explained the method by which he calculated General Poly's expected resin needs and said I put down a capacity figure of six hundred thousand pounds a month. Id. at 2234. 45 And then after we had those figures, well, Paul Heath says, Well, Hans, how much you gonna buy from us? And I said Well, obviously at least fifty percent or we wouldn't be here with that many people, and if you want to, we can go a hundred percent but that's something we need to talk about. Depends on how good you're gonna be to me. ... That's about as far as we went in the meeting.... Of course, it was understood it was going to be high molecular weight high-density polyethylene; but the specific quality of that resin was brought out during the meeting and the specific quality was a resin like the Hoescht 9255 F. 46 Id. at 2235. 47 Walker testified that the price of the HMW resin to be purchased from Allied was also discussed at the January 10th meeting. Don Bonin told me that they had to get a premium price over the injection molding grade resin and that their price would be what Singleton had said, depending on the market conditions, one to no more than two cents a pound over injection molding grade resin. R. Vol. 11 at 637; id. at 658. Walker testified that: 48 [W]e agreed that we would buy our material--I agreed that we would buy--Hans and I were there. Hans agreed also we would buy our material from Allied, once developing the product, once having a resin and knowing that we had a resin, we would go ahead with the project, we would buy one hundred percent of our requirements from Allied. And we would buy it at a benchmark price of one to two cents a pound over injection molding grade resin; that I told Mr. Bonin that. 49 Id. at 658-59. 50 Communications After the January 10, 1979 Meeting 51 Although General Poly contends that Allied assumed fiduciary obligations at the January 10, 1979 meeting, it also argues that communications with Allied after the meeting further demonstrated the formation of a fiduciary relationship on January 10, 1979. 52 Walker testified that Bonin called him within a week of the meeting in Houston. R. Vol. 11 at 660. Walker further testified as follows: 53 Mr. Bonin told me ... that Allied would not undertake contingent liabilities of a financial nature without approval from the board of directors.... He had a counterproposal as far as financial help from Allied and their financial assistance in the joint venture and that was within the realm of his authority as general manager, he said: We will give you extended trade terms as a portion of our financial contribution.... Mr. Bonin told me when we first started buying the material that we would set it up to start with on ninety day terms and that these terms could be adjusted, depending on how the project progressed.... And that was agreeable with me because when we did our cash flows and ninety day terms on eight million pounds of product would have been the same thing as giving us an injection of capital or working capital that would have amounted to about 5 hundred thousand dollars. 54 Id. at 660-62. According to Walker, Bonin also said, I'm going to forward you ... the secrecy agreement that we talked about in our meeting of January the 10th. Id. at 664. 55 As discussed in his phone conversation with Walker, on January 23, 1979, Bonin sent Walker a letter containing the following statements: 56 It is our intention, as stated to you in our recent meeting in Houston, to pursue the development of competitive polymers to satisfy [the] market. As you know we already supply some resins for the film market but feel that additional new resins are needed and can be developed to meet specific requirements such as yours. 57 As discussed at our meeting with you and Mr. Hans Traver, we would like to have you evaluate these new resins as they are developed. 58 We, therefore, are proposing that we enter into a joint technical development program with your commitment to test new resins at the Peru Plant in Lima, Peru. To this end we will be forwarding under separate cover a secrecy agreement required to insure the confidentiality of our joint effort. 59 Plaintiff's Ex. 139 (First Addendum to Appellant's Br., Doc. 3); R. Vol. 11 at 665. The next day, in a letter to more senior Allied management, Bonin wrote: 60 Attached for your files is a review of all activities concerning General Poly to date. We are pursuing this matter in some detail because of the complexities involved in acquiring technical skills to penetrate the film market. In the absence of the pilot plant equipment for development work, we must develop a plan of pulling ourselves up by the bootstraps in this area.I believe that General Poly Corporation, if formed, offers us an opportunity for ground floor participation in a plant designed specifically for processing high density polyethylene film. 61 Plaintiff's Ex. 141 (First Addendum to Appellee's Br., Doc. 8). 62 On February 14, 1979, a draft of the agreement Bonin and Walker had discussed was sent to Walker. After a series of proposed changes and revisions and lengthy delays, a final copy was signed by the authorized representatives of both General Poly and Allied and dated September 21, 1979. That agreement [the September 1979 Agreement] provides, in relevant part: 63 WHEREAS, Allied Chemical is a manufacturer of high density polyethylene resin; 64 WHEREAS, General Poly desires to manufacture high density polyethylene films for which high density polyethylene resins having special characteristics may be required; 65 WHEREAS, Allied Chemical and General Poly desire to enter into a period of joint cooperation aimed at developing and evaluating high density polyethylene resins having the characteristics required for the manufacture of such high density polyethylene films; 66 NOW, THEREFORE, in consideration of the mutual understanding hereinafter set forth, it is agreed as follows: 67 1. Joint Cooperation. Upon execution of this agreement there shall commence a one (1) year period of joint cooperation in the performance of which Allied Chemical and General Poly shall cooperate with each other to develop high density polyethylene resins and films prepared therefrom. 68 1.1 During this period of joint cooperation, Allied Chemical shall have the royalty-free, exclusive right and license to use extrusion technology developed by General Poly. After this period of joint cooperation or extended period as provided for in Section 4.2 herein, Allied Chemical shall have a perpetual, royalty free, non-exclusive right and license to use such extrusion technology. 69 1.2 For a period commencing with the production by Allied Chemical of a semi-commercial or commercial scale of any new high density polyethylene film grade resin developed and terminating three (3) years thereafter, it is agreed that General Poly shall have the first right to purchase such high density polyethylene film grade resin from Allied Chemical up to a maximum of 500,000 pounds per month. General Poly's first right to purchase film grade pursuant to this Section 1.2, however, shall be contingent upon General Poly giving Allied Chemical at least thirty (30) days' prior written notice of its requirements for each calendar month in which General Poly chooses to exercise its first right to purchase. With respect to each calendar month for which Allied Chemical receives no written timely notice, as provided for herein, Allied Chemical shall be relieved of any obligation to General Poly. 70 2. Secrecy. For a period of five (5) years from the date hereof, General Poly shall maintain in confidence all information disclosed to it in writing hereunder by Allied Chemical and Allied Chemical shall maintain in confidence all information disclosed to it in writing by General Poly relating to extrusion of high density polyethylene film. Each party shall take all reasonable steps and measures necessary to prevent disclosure of such information to third parties; provided, however, that the foregoing obligations shall not apply to any such information if and to the extent that: 71 (a) at the time of disclosure or subsequent thereto, through no fault of the receiving party, it was or it becomes known to the general public; or 72 (b) it had been independently perfected by the receiving party or was otherwise in the receiving party's lawful possession prior to disclosure, as shown by written records; or 73 (c) after such disclosure it is acquired from a third party which did not acquire the information under an obligation of confidentiality from or through the disclosing party. 74 Nothing herein shall prevent the use of such information in conjunction with the prosecution of patent applications, or as deemed necessary in conjunction with the sale of resin or film products. 75