Breach of Fiduciary Duties; Misappropriation of Trade Secrets

The United Group of National Paper Distributors, Inc. et al. vs. Carole S.G. Vinson, et al.
Fourth Judicial District, Parish of Ouachita, State of Louisiana; Case No. 91-1046

Counsels for Plaintiffs: DeRussy, Bezou & Matthews; Theus, Grisham, Davis & Leigh
Expert for Plaintiffs: Marc S. Margulis, C.F.A., A.S.A., M.B.A.

By a letter dated March 13, 1990, certain defendants made an offer to acquire all of the stock of The United Group owned by Bancroft Paper Company, Inc., a plaintiff, for cash in the amount of $1.3 million. Bancroft Paper rejected said offer. Immediately thereupon, defendants embarked upon a concerted plan to form a competitive buying group modelled after The United Group and comprising as many of The United Group’s members and preferred suppliers as they might attract. The defendants’ company, Consolidated Distributors, Inc., was organized under Louisiana law on May 9, 1990. The initial shareholders of Consolidated included Susan Vinson, president of The United Group since January 20, 1987 and certain members of the United Group’s Board of Directors. Beginning on March 24, 1990, defendants began solicitation of members and suppliers from among The United Group’s roster. The results of such solicitation predetermined for the defendants the potential viability of their venture.

On May 15, 1990, Susan Vinson resigned as president and director of The United Group, six days subsequent to her election as president and director of Consolidated Distributors. On May 16, 1990, the defendants sent letters to and otherwise made contact with all members and suppliers of The United Group soliciting their affiliation with Consolidated. The solicitations coupled membership in Consolidated with disaffiliation from The United Group.

Of approximately 188 members, The United Group lost 98 members and two preferred suppliers as a direct consequence of the defendants’ actions, causing the United Group to suffer lost profits.

Mr. Margulis performed an analysis of the past and future losses sustained by the plaintiff, the present value of which we reasonably estimated to be $9.5 million.

The jury found for the plaintiffs on all counts and awarded damages in the amount of $9.5 million