Victory In Landmark School Case
Lewis Rice attorneys Richard B. Walsh, Jr. and Evan Z. Reid successfully represented the Special Administrative Board governing St. Louis Public Schools and a local taxpayer in opposing a state law that required the district to pay tuition and transportation costs for students to transfer to other school districts, but provided no funding.
The evidence at trial established that the annual cost to St. Louis Public Schools in connection with the law's mandates would be nearly $300 million. The court agreed with the St. Louis Public Schools District and the taxpayer that the law violated the Hancock Amendment to Missouri's Constitution because it imposed new costs without adequate funding from the state and that compliance with the law was impossible. The court blocked enforcement of the law and awarded costs to the school district and attorney's fees to the taxpayer.
Lewis Rice Upholds Missouri Franchise Act in Alcohol Distribution Case
Lewis Rice represented Major Brands, a multi-generation Missouri family-owned wine, spirits, and beer distributor, in a suit against Diageo, the world's largest liquor supplier, which arose after Diageo terminated its decades-long relationship with Major Brands and moved approximately $100 million in business to a much larger multi-state distributor that was also Major Brands' chief competitor, Texas-based Glazer's. The litigation centered on the interpretation and applicability of the Missouri Franchise Act, which prohibits the termination of liquor distribution relationships, unless the supplier can first establish statutorily defined good cause.
For Major Brands, the stakes could hardly have been higher. In a 24-hour period, Major Brands received notices of termination from Diageo and other suppliers, which would mean that Major Brands stood to lose close to half of its revenue in the coming months. The liquor distribution industry likewise had much riding on this case. Missouri is one of approximately 17 states with liquor franchise laws, which are generally disfavored by large suppliers. This case was viewed by those in the industry as a testing ground for suppliers' future challenges to franchise laws through distributor terminations.
The Lewis Rice Team
The trial team from Lewis Rice was led by Richard B. Walsh, Jr., Chairman of the Litigation Department. His creative, out-of-the-box approach was critical to achieving the mid-trial settlement and assisting the client with navigating the business and regulatory challenges posed by this case. Rick Walsh assembled a small trial team of experienced Lewis Rice members and associates, giving each core team member significant responsibility and a level of autonomy that allowed the team to effectively pursue an aggressive discovery and trial strategy. In addition to Rick, the core team included Evan Z. Reid, Bridget G. Hoy, Oliver H. Thomas, R. Taylor Matthews, III, Derick C. Albers, Sarah A. Milunski, and Edward T. Pivin. About his team, Rick said: "The depth of talent that we have at Lewis Rice, at all levels, allows us to staff cases leaner, know the facts better, and adjust quicker. Those advantages become particularly apparent in cases like this, where there is a large volume of documents, witnesses, and briefing, accompanied by an aggressive schedule that creates extreme time pressure."
In the second week of trial, Major Brands reached a confidential settlement with Diageo and Glazer's. In announcing the settlement, the following statements were issued:
"The parties in the Missouri trial of Major Brands against Diageo and Glazer's have settled the case for a substantial payment made to Major Brands. Diageo issued the following statement: Diageo is pleased to amicably resolve this regrettable dispute. Diageo continues to distribute our beer and Smirnoff Ice lines with Major Brands, recognizing it as a well-run, family-owned business, which in the words of the late Todd Epsten, 'uses its business to build the community.' We look forward to growing that business in Missouri with Major Brands. Major Brands is thankful to the Judge, the Missouri judicial system, and the St. Louis citizens who sat on the Jury, and appreciates Diageo's kind words about Todd. The company is happy to put this matter in the rear-view mirror and remains committed to providing our retailers and suppliers with outstanding service and performance."
Lewis Rice Obtains $4.5 Million Judgment for Petter Packaging
After a four-day bench trial in St. Clair County, Illinois, and extensive post-trial briefing, Lewis Rice attorneys R. Bradley Ziegler and Matthew J. Haas obtained a $4,579,664.05 judgment for their client, Petter Packaging, LLC (“Petter Packaging”), in a case involving claims for breach of fiduciary duties and breach of a covenant not to compete. The award included $2,250,000 in punitive damages.
Brad and Matt represented Petter Packaging, a packaging supply company, in a lawsuit against its former President, Charles Hutchcraft (“Hutchcraft”), and five other defendants (collectively “Defendants”) in which Petter Packaging alleged, among other things, (1) the Defendants diverted a profitable business deal away from Petter Packaging for themselves while Hutchcraft was operating as Petter Packaging’s President; and (2) the Defendants began competing with Petter Packaging after Hutchcraft’s termination in violation of a covenant not to compete. The evidence at trial established that Petter Packaging hired Hutchcraft as President of Petter Packaging under the terms of an employment agreement and covenant not to compete in 2002. Petter Packaging later discovered that Hutchcraft and the other Defendants (his wife and several companies) acted in concert to divert a new, lucrative business opportunity away from Petter Packaging to a company owned and operated by Hutchcraft in violation of his fiduciary duties and the covenant not to compete. Hutchcraft diverted that opportunity in 2006 and concealed his breaches until just prior to his termination in 2010. Immediately upon his termination, Hutchcraft and Defendants began competing against Petter Packaging.
Judge Stephen Rice presided over the trial and found in favor of Petter Packaging. In his Order, Judge Rice awarded damages for Hutchcraft’s breach of his fiduciary duties owed to Petter Packaging and, despite Defendants’ arguments that the covenant not to compete was no longer in effect at the time of Hutchcraft’s termination and that it was too restrictive, enforced the agreement as written and awarded damages for breach of the covenant not to compete. Judge Rice awarded Petter Packaging compensatory damages, including lost profits and reasonable attorneys’ fees, expert fees, and costs, in the total amount of $2,329,664.05. Judge Rice found that punitive damages were warranted and awarded $2,250,000. Significantly, Judge Rice found all Defendants acted in concert in causing the breaches of fiduciary duties and breaches of the covenant not to compete and found Defendants jointly and severally liable for all damages awarded. Three of the Defendant companies, which were formed by Hutchcraft after his termination, were found to be nothing more than alter egos of Hutchcraft and were found to be jointly and severally liable for all damages.
Click under "Resources" below to view a copy of Judge Rice’s order.
The Lewis Rice Team
Lewis Rice Member Brad Ziegler primarily handled the lawsuit for Petter Packaging and was the lead trial attorney. Matt Haas second-chaired at trial and assisted Brad with pre-trial matters and post-trial briefing. Jack Martin assisted the team with research and briefing throughout the case, including with the argument to enforce the covenant not to compete as written. Geralyn Spacher assisted the team before and during trial. Finally, Rubin Brown Partner Thomas Zetlmeisl served as Petter Packaging’s expert witness at trial. Judge Rice found his opinion regarding damages to be logical and consistent.