Cengage Advantage Books: Foundations of the Legal Environment of Business 3rd Edition by Marianne Jennings

تمرين 10

Lucini Italia Co. v. Grappolini 2003 WL 1989605 (N.D. Ill. 2003) (an unpublished opinion)
A Slick Deal by the Olive Oil Agent
Facts
Lucini Italia imports and sells premium extra virgin olive oil of Italy. Lucini was formed by Arthur Frigo, a Chicago entrepreneur and adjunct professor of management and strategy at Northwestern University's Kellogg Graduate School of Management. Giuseppe Grappolini and his company (defendants), from Loro Ciuffenna, Italy, served as a consultant to Lucini. Under his consulting contract, Mr. Grappolini was to develop Lucini Premium Select extra virgin olive oil. Mr. Frigo had discovered a market niche in the United States for high-end olive oil ($10 to $12 per bottle).
Mr. Frigo instructed Mr. Grappolini to negotiate an exclusive supply contract for Lucini with Vegetal, an Italian company with a unique olive oil that Mr. Frigo needed to develop an olive oil with lemon and garlic added (called the LEO project). Vegetal was the only company that could supply the type of olive oil Mr. Frigo needed. Mr. Grappolini led Mr. Frigo along with promises of a deal with the Vegetal company for nearly a year, through reports of meetings as well as with faxes and memos appearing to detail terms, conditions, and dates for delivery. Mr. Grappolini was meeting with Mr. Frigo almost daily as they discussed the plans for the new Lucini olive oil.
Nervous as he launched LPE, Mr. Frigo had Lucini's lawyer in Italy contact Vegetal directly for a copy of the contract he thought he had with Vegtal. The lawyer learned that Vegetal had a supply contract, but the contract was with Mr. Grappolini's company and that it was not transferable to Lucini. The officers at Vegetal said that Grappolini had been a "bad boy" in negotiating the contract for himself. Vegetal agreed to supply Lucini with olive oil, but could not deliver it in time for the launch of Lucini's new line. Mr. Frigo and Lucini sued against Mr. Grappolini and his company for breach of fiduciary duty.
Judicial Opinion
DENLOW, Magistrate
As agents, Defendants owed Lucini general duties of good faith, loyalty, and trust. In addition, Defendants owed Lucini "full disclosure of all relevant facts relating to the transaction or affecting the subject matter of the agency."
Defendants were Lucini's agents and owed Lucini a fiduciary duty to advance Lucini's interests, not their own. When Defendants obtained an exclusive supply agreement with Vegetal for the Grappolini Company instead of for Lucini, they were disloyal and breached their fiduciary duties. Lucini suffered substantial damages as a result of this breach.
Punitive damages are appropriate where the defendant has intentionally breached a fiduciary duty. Defendants' breach of their fiduciary duties was flagrant and intentional. Defendants deliberately usurped a corporate opportunity sought by Lucini, which Lucini had entrusted Defendants to secure on Lucini's behalf. Although Defendants explicitly accepted this trust and ensured Lucini that Mr. Grappolini and his company would do as Lucini requested, Defendants failed to do so and hid this fact from Lucini.
Defendants misappropriated Lucini's valuable trade secrets. Defendants acquired Lucini's trade secrets under circumstances giving rise to a duty to maintain their secrecy.
Lucini's decision to focus its LEO project around essential oils from Vegetal Progress was a closely guarded trade secret.
As a proximate result of Defendants' breach of their fiduciary duties, Lucini suffered lost profits damages of at least $4.17 million from selling its grocery line of LEO products from 2000 through 2003. The Court will award Lucini its lost profits of $4,170,000, together with its $800,000 of development costs for LEO project. Defendants engaged in willful and malicious misappropriation as evidenced by their use of the information for directly competitive purposes and their efforts to hide the misappropriation and, accordingly, the Court will award $1,000,000 in exemplary damages. Such an award is necessary to discourage Defendants from engaging in such conduct in the future.
Case Questions
1. What lessons can you learn about contracts, suppliers, and product launches from the case?
2. Explain why the court decided to award both lost profits and punitive damages.
3. Evaluate the ethics of Mr. Grappolini's conduct. Why did Vegetal's officers refer to Mr. Grappolini as a "bad boy"?