Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Packaging coating manufacturer allegedly created group boycott of competing supplier, (Oct 20, 2015)

By Linda O’Brien, J.D., LL.M.

A manufacturer of specialty coatings for the packaging industry has engaged in anticompetitive conduct by creating a group boycott of a competing supplier’s products, according to a complaint filed in the federal district court in Philadelphia (DePrince v. Cork Industries, Inc., October 15, 2015).

Cork Industries is a leading developer and manufacturer of specialty coatings for graphic arts printing and packaging industries. Thomas DePrince was formerly employed as a laboratory technician by Cork.

The complaint states that, in October 2010, DePrince was terminated from employment with Cork for his refusal and failure to execute Cork’s non-disclosure and confidentiality agreement. In 2011, Dixie Consumer Products, a purchaser of products from Cork, undertook a product change initiative designed to remove an environmental contaminant, alkyl phenol ethoxylate (APEO), from their paper plate coating manufacturing. DePrince, along with Barbara Egan and her company Low Voc Industries, Inc., formulated an APEO free wetting solution, MC65, to sell to Dixie for use in its manufacturing process.

Dixie began purchasing MC65 from Low Voc Industries until December 2012, when Dixie ceased any additional purchases from Low Voc. Dixie discontinued its purchases due to Cork’s threats to cease purchasing from Low Voc or Cork would cease selling Dixie its paper plate coating, the only qualified supplier of that essential manufacturing product at that time. However, Dixie informed Low Voc that the reason for discontinuing its purchases was Low Voc’s small size, and Dixie was toll manufacturing through another company, Chemcor, the complaint alleges.

According to the complaint, in 2012, Cork filed a complaint against DePrince, alleging trade secret violations, unfair competition, and breach of contract. Cork initiated the litigation despite evidence showing that the products submitted to Dixie for purchase were distinctly different from the existing products sold to Dixie while DePrince was an employee of Cork. Furthermore, DePrince was not bound by a non-disclosure or non-compete agreement as an employee of Cork.

In 2013, Low Voc formed a joint venture with ACI-Tech Industries to develop and manufacture an APEO free wetting agent specifically formulated for Dixie. ACI-Tech began selling the new and improved solution, WA4045A to Dixie, which fulfilled its requirements for aiding the formulation of bowls without tearing. Dixie purchased ever-increasing amounts throughout 2013. In October 2013, as ACI-Tech was negotiating with Dixie for a formal contract for ongoing sales of the WA4045A solution, Dixie inquired if DePrince had any involvement with the development of WA4045A. After ACI-Tech revealed its relationship with Low Voc and DePrince, Dixie abruptly ceased contract negotiations and discontinued its purchases from ACI, the complaint charges.

The complaint also alleges that Cork’s threats to Dixie that it would cease selling Dixie the only approved paper plate coating if Dixie did not discontinue purchases from Low Voc constituted a group boycott, an illegal tying agreement, and an unlawful restraint of trade. The plaintiffs sustained damages as a result of Cork’s conduct intentionally interfering with ACI-Tech’s sales as well as the contractual relationship with Dixie.

The plaintiffs assert claims for intentional and tortious interference with existing and prospective contractual relations, abuse of process, and restraint of trade in violation of Sections 1 and 2 of the Sherman Act. The action seeks compensatory, punitive, treble and statutory damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-05643-SD.

Attorneys: Michael LaRosa (LaRosa & Nastasi) for Thomas DePrince, Barbara Egan, Low Voc Industries, and ACI-Tech Industries, LLC.

Companies: ACI-Tech Industries, LLC; Cork Industries, Inc.

News: Antitrust PennsylvaniaNews