Monday, November 30, 2009

Brass Metal Products, Inc. v. E-J Enterprises, Inc. (Ct. of Special Appeals)

Filed: November 30, 2009
Opinion by Judge Kathryn Grill Graeff

Held: To establish a claim for conversion, the plaintiff must first demonstrate that he or she had a property interest in property that was allegedly converted. Where the Defendant E-J Enterprises, Inc., ordered and paid for aluminum railings to store for Plaintiff Brass Metal Products, Inc., until Brass Metal requested delivery, E-J owned the railings until it sold them to Brass Metal. When E-J sold the railings to another company, it may have violated the business agreement between the parties, but its actions did not constitute conversion. The claim that E-J converted Brass Metal’s interest in the designs of the aluminum railings asserts intangible property rights. Conversion claims for intangible property rights are limited to situations where the intangible property rights are merged into a document that has been transferred. Where no such showing was made, the conversion claim failed.

Brass Metal alleged that, based on custom and usage, E-J converted the unpatented design of its railings. Brass Metal cites no case holding that custom and usage in an industry can create property rights that give rise to a conversion claim. Even if custom and usage could create property rights, Brass Metal failed to present sufficient evidence to establish that there was a uniform, definite, and well-established custom in the aluminum extrusion industry that a person who creates a die possesses a property right in the shapes created from the die.

Brass Metal failed to produce sufficient evidence to create a jury question regarding whether a confidential relationship existed between the parties, such that E-J had a duty to disclose its business dealings with Brass Metal’s competitor. Where two businesses are engaged in an “arms-length” transaction to further their own separate business objectives, a confidential relationship does not exist. E-J did not exercise the type of dominion and influence over Brass Metal that would establish a confidential relationship.

Facts: E-J, a wholesale metal distributor, entered into an agreement with Brass Metal to provide “just-in-time” inventory services, which entailed purchasing aluminum railings directly from aluminum extrusion mills, storing these railings, and selling them to Brass Metal as needed. The railings were designed by Brass Metal’s owner and President, James Burger, but Burger did not patent his railing designs.

In April 2006, E-J sold railings that were being held for Brass Metal to another company, Parthenon Installations. Thomas Martin, a Brass Metal salesman, owned a majority interest in Parthenon. In July 2006, when Burger discovered that Parthenon had established a manufacturing facility that was a “duplicate” of his facility, he fired Martin. Burger then requested that E-J stop selling railings based on Burger’s design to Parthenon. E-J declined Burger’s request and this lawsuit followed. Prior to trial, Brass Metal settled claims that it had brought against Parthenon, Martin, and Anastasios Pantoulis, another partner in Parthenon.

Analysis: At the outset of the opinion, the Court stated that:
Our review of the record, in the light most favorable to Brass Metal, reflects the following: (1) Brass Metal and E-J Enterprises entered into an agreement whereby E-J Enterprises would purchase railings from an aluminum extrusion mill and then supply the railings to Brass Metal as needed; (2) Brass Metal contacted mills and gave authority for E-J Enterprises to order railings from Brass Metal’s dies; and (3) Brass Metal may have given E-J Enterprises drawings of its designs to enable E-J Enterprises to order additional dies. Brass Metal points to no place in the record that supports its assertion that it gave E-J Enterprises dies, metallurgical formulas, trade secrets, or other confidential information.
As to Brass Metal's claim of conversion of its die designs, the Court found that Brass Metal did not obtain a property interest in the shapes and designs by custom and usage because custom and usage in an industry cannot create property rights that give rise to a conversion claim. Moreover, there would have had to be proof that the alleged custom and usage was “definite, uniform, well established, and so general that knowledge of it may be presumed . . . .” There was no such proof in this case.

As to the claim of conversion with respect to the aluminum railings, the evidence at trial established that E-J purchased aluminum railings from the mill, and it stored the railings until Brass Metal requested a delivery. Once the railings were delivered, Brass Metal was obligated to pay E-J within 30 days. Although selling the railings to other people may, or may not, have been contrary to the agreement between the parties, it did not constitute conversion.

As to Burger's claim of conversion of its dies, the Court found that Brass Metal failed to prove that E-J deprived Brass Metal's owner, the owner of the dies, possession of the dies.

With regard to various specific contracts and business relationships, the Court found that Brass Metal failed to adduce proof as to a number of the elements of tortious interference with contract.

As to the claim for deceptive concealment, the Court found that there was no confidential relationship between Brass Metal and E-J, since "[w]here businesses are engaged in an 'arm’s length' transaction, a confidential relationship does not exist."

Brass Metals also raised various evidentiary challenges, all of which were rejected by the appellate court.

Practice Pointers: Brass Metals could have avoided the problems it faced had it entered into appropriate agreements with E-J and its employees, such as Martin, and others, such as Pantheon, restricting their right to compete.

A copy of the opinion is available in PDF.

No comments:

Post a Comment