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SKG International, Inc. v. SKG Italia, S.p.A.

United States District Court, E.D. Michigan, Southern Division

January 31, 2017

SKG International, Inc., Plaintiff,
v.
SKG Italia, S.p.A., et al., Defendants.

          OPINION & ORDER DENYING PLAINTIFF'S MOTION FOR TEMPORARY RESTRAINING ORDER/PRELIMINARY INJUNCTION

          Sean F. Cox United States District Court Judge

         Plaintiff SKG International, Inc. (“International”) filed this action against Defendants SKG Italia, S.p.A. (“Italia”) and Michele Bernini (collectively “Defendants”) on December 30, 2016. On that same date, International filed a Motion for Temporary Retraining Order/Preliminary Injunction and a motion asking the Court to expedite the motion. This Court held an evidentiary hearing and heard oral argument on January 19, 2017, and January 20, 2017.

         For the reasons set forth below, the Court DENIES Plaintiff's motion.

         BACKGROUND

         Plaintiff International filed this action against Defendants Italia and Michele Bernini on December 30, 2016. On that same date, International filed a Motion for Temporary Retraining Order/Preliminary Injunction and a motion asking the Court to expedite the motion.

         International's Verified Complaint contains the following four counts, asserted against Defendants:

• “Count I - Injunctive Relief” - wherein International asks the Court to issue a TRO and/or preliminary injunction that: 1) requires Italia to supply components/products to International; and 2) prohibits Italia from communicating or contacting International's customers regarding the supply of components.
• “Count II - Breach of the Licensing Agreement” - asserted against Italia, wherein International asserts that Italia breached the parties' License Agreement by: 1) refusing to provide supplier and cost information; 2) by contacting, communicating, and soliciting its customers; and 3) committing other breaches concerning payments. This Count seeks monetary damages and an award of attorney fees.
• “Count III - Intentional Interference with Contractual Relationships and Business Expectancies” - asserted against Italia, wherein International asserts that Italia has wrongfully and maliciously interfered with its contractual relationships and business expectancies with its customers. This Count seeks monetary damages and attorney fees.
• “Count IV - Breach of Fiduciary Duty” - asserted against Michele Bernini, wherein International asserts that he has breached his fiduciary duties to it in a number of different ways. This Count seeks monetary damages and an award of attorney fees.

         This Court held a conference with the parties on January 9, 2017. During that conference, the Court explored settlement of the preliminary injunction motion with the parties. Although the Court was preparing for a criminal Medicare fraud trial that was to commence the following day, the Court devoted the better part of a full day to that conference. During that conference, International's counsel stated that International was in the process of obtaining a letter of credit. The parties were unable to come to any kind of resolution as to the requested preliminary injunction.

         This Court then scheduled the pending Motion for TRO/Preliminary Injunction for January 18, 2017. The Court also ordered the parties to submit the following materials to the Court prior to the hearing: 1) witness lists; 2) exhibit lists; and 3) proposed findings of fact and conclusions of law. Specifically, the Court ordered:

IT IS FURTHER ORDERED that Defendants shall file their response to Plaintiff's Motion for Temporary Restraining Order and Preliminary Injunction no later than Thursday, January 12, 2017, at 5:00 p.m.
IT IS FURTHER ORDERED that, no later than January 13, 2017, at 1:00 p.m., each party shall file: 1) a Witness List, that lists each witness that may be called at the January 18, 2017 hearing, along with a short summary of the expected testimony, and an estimate of the length of the expected testimony, of each witness; 2) an Exhibit List, listing each exhibit that may be presented at the January 18, 2017 hearing; and 3) Proposed Findings of Fact and Conclusions of Law, set forth in separately-numbered paragraphs.
IT IS FURTHER ORDERED that two (2) courtesy copies of each of the above filings shall be delivered to the Court on the dates that the filings are due.
IT IS SO ORDERED.

(D.E. No. 13) (emphasis in original).

         Defendants filed all of their required materials as ordered by the Court. That included Defendants' response to the motion and an Affidavit of Olivia Bernini. (D.E. No. 15-1).

         When Plaintiff had not filed anything by late afternoon on January 13, 2017, this Court issued a Show Cause Order, requiring Plaintiff to show cause by 5:00 p.m. why the Court should not deny the motion and cancel the hearing. (D.E. No. 20).

         Thereafter, Plaintiff's Counsel filed its materials, along with a “Motion for Acceptance of Late-Filed Witness List, Exhibit List, and Proposed Findings of Fact and Conclusions of Law.” (D.E. No. 24). Contrary to the Court's order, however, Plaintiff did not provide any estimate for the length of time that Plaintiff would need to examine its two witnesses. The Court had requested that information from the parties because the Court was attempting to schedule the evidentiary hearing around the criminal jury trial and matters relating to that case.

         The Court held an evidentiary hearing, and heard oral argument from counsel, on January 19, 2017, and January 20, 2017.

         At the evidentiary hearing, International presented two witnesses, who were cross-examined by Defense Counsel: 1) Steve Tarino, the Chief Financial Officer and a Director of International; and 2) Fariborz Kayyod, International's Chief Executive Officer. Defendants presented two witnesses, who were cross-examined by International's Counsel: 1) Olivia Bernini, who serves a member of the Board of Directors of Italia and has senior management responsibility of its operations; and 2) Michele Bernini who works in research and development for Italia and is a chairmen of International. The Court also received a number of exhibits.

         FINDINGS OF FACT AND CONCLUSIONS OF LAW

         Having heard and observed the witnesses who testified at the evidentiary hearing, allowing for this Court to assess credibility, having considered the exhibits submitted by the parties, having reviewed all matters of record for this case, having considered the arguments presented by counsel, and having applied the governing legal principles, the Court makes the following findings of fact and conclusions of law, for purposes of the pending motion.[1]

         FINDINGS OF FACT

         Italia manufactures and sells component and finished parts that are used in automotive heating, ventilation, and air-conditioning systems (“HVAC”) world-wide. Italia's automotive products use Italia's confidential intellectual property, which includes specifications and designs, which were developed through many years of design, engineering, coordination with suppliers, and quality control.

         Prior to the formation of International and execution of the License Agreement, Italia's customer base included Valeo Group (“Valeo”), Keihin Thermal Technology of America, Inc. (“Keihin”), and Modine Manufacturing Company (“Modine”).

         In 2013, Italia had the necessary intellectual property and expertise in the manufacturing process to expand its business into North America. But it needed a financial partner and local management. Italia was introduced to Kayyod and Tarino as potential partners.

         On or about November 1, 2013, Italia, along with Bell the Cat (an entity owned by Kayyod) and MCP SKGI, LLC (an entity owned by Tarino), formed International and entered into a Shareholders' Agreement. (Def.'s Ex. 1). The intent of the shareholders was to form a company (International) that would source its own components and manufacture, assemble, and sell automotive parts, based on Italia's intellectual property, in North America, South America, and Central America.

         On that same date, Italia and International entered into a written “License and Technology Transfer Agreement” (“the License Agreement”) (Def.'s Ex. 2).

         During the term of the License Agreement, International had the right to use Italia's intellectual property to source its own materials and manufacture products. Specifically, the Licensing Agreement provided:

(a) Licensed Technology Transfer. Immediately, upon commencement of this Agreement and for a period of fifteen (15) years thereafter, the Licensor will use its reasonable commercial efforts to effectuate the transfer of the Licensed Technology by meeting with, discussing with and assisting the Licensee:
(i) to ensure the proper communication of requirements on Product design, Product features, performance, price and/or other requirements to Product sales process;
(ii) to ensure the timely development and assistance in certification (if applicable) of new Products to Licensee's or customers' specifications and the procurement and delivery of samples, as required;
(iii) to ensure the timely development of the manufacturing process necessary for the manufacture of the Products by Licensee which may incorporate all relevant information pertaining to the relevant Product, which may include, without limitation: development schedules, product specifications and tooling specifications, purchase terms, long-lead time components, qualified suppliers and quality requirements.
(iv) to assist Licensee in developing the quality standards and test specifications for the Products.

         Notably, the Licensing Agreement does not require Italia to sell or supply any parts, components, or products to International.

         The Licensing Agreement required International to pay Italia a “royalty of three percent (3%) of any and all Gross Revenues derived from any and all sources in connection with the Products in consideration for the obligations of Licensor under Section 2A.” (Ex. A of Licensing Agreement). In sum, as Fayyod testified at the evidentiary hearing, International was required to pay a 3% royalty to Italia for all of the products that International sold. The Licensing Agreement provided that ...


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