Ecore Int'l, Inc. v. Downey

343 F.Supp.3d 459

ECORE INTERNATIONAL, INC.

v.Paul DOWNEY et al.

CIVIL ACTION NOS. 11-6843

16-1993

United States District Court, E.D. Pennsylvania.

Signed October 12, 2018

Joseph E. Wolfson, Stevens & Lee, Philadelphia, PA, Robert C. Nissen, Nissen & Associates LLP, Washington, DC, Elizabeth A. Ware, Stacey A. Scrivani, Stevens & Lee, Reading, PA, Nicholas H. Pennington, Stevens & Lee PC, King Of Prussia, PA, for Ecore International, Inc.

Danielle Anne Phillip, Jeffery A. Handelman, James Robert Sobieraj, Brinks Gilson & Lione, Chicago, IL, Jennifer J. Theis, Jon H. Beaupre, Brinks Gilson & Lione, Ann Arbor, MI, John F. Stoviak, Patrick M. Hromisin, Saul Ewing Arnstein & Lehr LLP, Kevin Dooley Kent, Andrew S. Gallinaro, Conrad O'Brien, PC, Philadelphia, PA, Kevin C. Kaplan, Coffey Burlington PL, Miami, FL, for Paul Downey et al.

MEMORANDUM

SURRICK, District JudgePresently before the Court in these consolidated actions are the parties' cross-Motions for Summary Judgment with respect to certain of Plaintiff's claims and Defendants' counterclaims.¹

This litigation arises from a business dispute between Plaintiff Ecore International, Inc. ("Ecore") and its Chairman and CEO, Arthur Dodge, III, and Defendants, Paul Downey and his companies, CSR Industries, Inc. ("CSR") and Pliteq, Inc. ("Pliteq"). The parties have asserted various claims and counterclaims against each other, all of which generally relate to Downey's and CSR's former consulting relationship with Ecore, and to the parties' dispute over the rights to several patents and the underlying intellectual property.

Plaintiff's Motion (ECF No. 88) seeks summary judgment on: Ecore's breach of contract claim (Count IV, Am. Compl., ECF No. 49.), Downey's claims for breach of contract (Countercl. I, Answ. & Countercl., ECF No. 50) and quantum meryit /unjust enrichment (Countercl. II), CSR's claim for quantum meruit /unjust enrichment (Countercl. IV), Downey's and CSR's claims for promissory estoppel (Countercl. V) and fraudulent inducement (Countercl. VI), and Pliteq's claims for tortious interference with contract and prospective contract (Countercls. VII, VIII). Ecore also seeks summary judgment that it is the owner of a patent at issue in Pliteq's claim of false marketing (Countercl. XIV).

Defendants' Motion (ECF No. 85) seeks summary judgment on: Counterclaims I, II, and IV; CSR's breach of contract claim (Countercl. III); portions of Plaintiff's Lanham Act claim (Count I); and Plaintiff's claim for conversion (Count I, Compl., Case No. 16-1993, ECF No. 1).

For the reasons that follow, Ecore's Motion for Summary Judgment will be granted on Defendants' Counterclaims I, II, IV, V, VI, VII, and VIII; granted in part on Ecore's Count IV; and denied as to Counterclaim XIV. Defendants' Motion for Summary Judgment will be granted on the portions of Ecore's Count I that are based on the alleged alteration of product test reports. In all other respects, Defendants' Motion will be denied.

I. BACKGROUND

A. Factual Background²

The company now known as Ecore was formed in 1869 and, throughout its existence, Ecore has been in the business of transforming reclaimed materials into new products.³ (Pl.'s SJ Br. 3.) In 1990, Ecore, then operating under the name Dodge Cork Company, formed a joint venture with a German company, Berleburger Schaumstoffwerk GmbH ("BSW"), in order to use BSW technology in the United States and expand Ecore's business in the market for recycled rubber products. (Dodge 8/22/16 Dep. 17-18.)⁴ Dodge became CEO of the venture, and the company name was changed from Dodge Cork Company to Dodge-Regupol, Inc. ("DRI"). (Id. at 18-19.) In January 2008, the joint venture was dissolved, and the "Dodge-side" of the venture changed its name from DRI to Ecore.⁵ (Id. at 26.)

Paul Downey is a chemical engineer and a citizen and resident of Canada. (Downey 4/1/11 Dep. 7; Downey 11/29/16 Decl. ¶ 3, ECF No. 85-4.)⁶ From 1992 to 1999, Downey worked as a production supervisor at National Rubber Industries, Inc. ("NRI"), a rubber recycling company and competitor of Ecore's. (Downey 4/1/11 Dep. 14; Downey 11/29/16 Decl. ¶¶ 5-6; Ontario Ct. App. Op. ¶ 5, Pl.'s SJ Ex. F.)⁷ In 1998, while working at NRI, Downey founded CSR as an engineering consulting company. (Downey 11/29/16 Decl. ¶ 8; Downey 8/29/16 Dep. 53.)⁸

1. The Consulting Agreement

In August and September 1999, Downey and Dodge discussed a potential role for Downey with Ecore. (Ontario Ct. App. Op. ¶ 6.) On September 9, 1999, Dodge sent Downey a letter and an "Employment Proposal" offering Downey a position with Ecore as "Business Development Manager — Industrial Products." (Defs.' SJ Opp. Ex. 1.) Given Downey's status as a Canadian citizen and resident, Dodge proposed that Downey initially be retained as an independent contractor. (Id. ) Dodge's letter further stated: "[g]iven your history and industry knowledge, coincident with your joining the company and as a condition of your employment, we will require you to sign an Employee Confidentiality Agreement." (Id. ) In response to Ecore's offer, Downey proposed that Ecore instead enter into a consulting agreement with his company, CSR, because that arrangement would be advantageous to Downey under Canadian tax law. (Ontario Ct. App. Op. ¶¶ 7, 27; Ontario Sup. Ct. Op. ¶¶ 5, 30, Defs.' SJ Opp. Ex. 7.)⁹ Downey's attorney drafted a consulting agreement between Ecore and CSR, with Downey identified as CSR's "Key Person," and Downey sent the draft agreement to Dodge. (Downey 8/11/2011 Dep. 28, Pl.'s SJ Ex. B.)¹⁰

On September 14, 1999, Ecore and CSR entered into a Consulting Agreement, which was a modified version of the draft agreement Downey's attorney had prepared.¹¹ The Consulting Agreement defined Ecore as the "Client," CSR as the "Consultant," and Downey as a "Key Person of the Consultant." (Consulting Agmt. Pmbl, § 7(a).) Pursuant to the Consulting Agreement, and commencing on October 4, 1999, the Consultant was to "act as Manager Business Development — Industrial Products for the Client pertaining to the development and sale of Regupol sheets and rolls" in specified markets, and to provide other services, including "the investigation and development of new business opportunities within industrial market segments." (Id. § 1.) The Key Person provision of the Agreement stated, in relevant part:

The parties acknowledge that Paul Downey is a Key Person of the Consultant and is integral to the successful performance of the Services by the Consultant under this Agreement. It is acknowledged by the Consultant that Paul Downey will perform all services of the Services, unless the client otherwise consents in writing.

(Id. § 7(a).)

As the base fee for services provided under the Agreement, Ecore was to pay CSR $132,000 (CDN) per year, to be paid weekly.¹² (Id. § 3(a).) The Consulting Agreement provided that the base compensation would be reviewed annually and could be modified upward at Ecore's "sole discretion." (Id. § 3(b).) The Consulting Agreement provided that CSR was entitled to a bonus of $20,000 (CDN) if Ecore realized $1 million (USD) in new revenue in fiscal year 2000, plus 2.5 percent of all revenue over $1 million (USD) in that year. (Id. § 3(c).) In addition, CSR would be considered for participation in company-wide bonus distributions. (Id. ) The Consulting Agreement included a "Confidential Information" provision, which stated: "The Consultant will execute a copy of the Client's standard confidentiality agreement, and said confidentiality agreement, upon execution, will form a part of this agreement."¹³ (Id. § 8.)

2. The Confidentiality Agreement

Downey began working for Ecore in early October 1999 and, at Ecore's request, he executed a Confidentiality Agreement, dated October 1, 1999.¹⁴ (Downey 8/29/16 Dep. 118-119; Ontario Sup. Ct. Op. ¶ 15.) The parties to the Confidentiality Agreement were DRI, referred to as "Company," and Downey, referred to as "Employee." (Confidentiality Agmt. Pmbl.). In its Background section, the Agreement stated:

Company is prepared to engage Employee for employment with Company. Employee will be granted access to confidential and proprietary information of the Company as part of his employment. Employee is entering into this Agreement to grant to the Company protections regarding the Company's proprietary information. The parties of this Agreement agree and intend to be legally bound by the covenants as set forth in this Agreement.

(Confidentiality Agmt. Background.) The Confidentiality Agreement defined "Proprietary Information" as:

(a) all technology, know how, plans, designs, specifications, formulas, technical information, drawings, and other information related to the Company's products, production equipment, and manufacturing processes,

(b) audited and internally prepared financial statements and related supplementary information, and other financial information of the Company which may include information about revenue, expenses, prices, and profits, and

(c) all other information owned by or related to the Company which is not generally known within the industry in which the Company is engaged.

(Confidentiality Agmt. § 1.)

Under Section 2 of the Agreement, Downey agreed: (a) to treat Proprietary Information as "secret and confidential"; (b) to use Proprietary Information only for Ecore's benefit and not for his own benefit; (c) to not directly or indirectly disclose or communicate any Proprietary Information to anyone except as authorized by Ecore; and (d) to promptly return to Ecore all Proprietary Information, without retaining any copies, summaries, or excerpts, upon termination of his employment. (Id. § 2.) The Confidentiality Agreement also declared Ecore's "exclusive rights" to intellectual property relating to its Proprietary Information, stating:

All inventions or discoveries which relate to the Proprietary Information shall be the exclusive property of the Company. Whenever requested by the Company, either during or subsequent to employment,

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