Lucini Italia Co. v. Grappolini 2003 WL 1989605 (N.D. Ill. 2003) (an unpublished opinion) A Slick Deal by the Olive Oil

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Lucini Italia Co. v. Grappolini
2003 WL 1989605 (N.D. Ill. 2003)
(an unpublished opinion)
A Slick Deal by the Olive OilAgent
FACTS
Lucini Italia imports and sells premium extra virgin olive oil ofItaly. Lucini was formed by Arthur Frigo, a Chicago entrepreneurand adjunct professor of management and strategy at NorthwesternUniversity's Kellogg Graduate School of Management. GiuseppeGrappolini and his company (defendants), from Loro Ciuffenna,Italy, served as a consultant to Lucini. Under his consultingcontract, Mr. Grappolini was to develop Lucini Premium Select extravirgin olive oil. Mr. Frigo had discovered a market niche in theUnited States for high-end olive oil ($10 to $12 per bottle).
Mr. Frigo instructed Mr. Grappolini to negotiate an exclusivesupply contract for Lucini with Vegetal, an Italian company with aunique olive oil that Mr. Frigo needed to develop an olive oil withlemon and garlic added (called the LEO project). Vegetal was theonly company that could supply the type of olive oil Mr. Frigoneeded. Mr. Grappolini led Mr. Frigo along with promises of a dealwith the Vegetal company for nearly a year, through reports ofmeetings as well as with faxes and memos appearing to detail terms,conditions, and dates for delivery. Mr. Grappolini was meeting withMr. Frigo almost daily as they discussed the plans for the newLucini olive oil.
Nervous as he launched LPE, Mr. Frigo had Lucini's lawyer in Italycontact Vegetal directly for a copy of the contract he thought hehad with Vegtal. The lawyer learned that Vegetal had a supplycontract, but the contract was with Mr. Grappolini's company andthat it was not transferable to Lucini. The officers at Vegetalsaid that Grappolini had been a "bad boy" in negotiating thecontract for himself. Vegetal agreed to supply Lucini with oliveoil, but could not deliver it in time for the launch of Lucini'snew line. Mr. Frigo and Lucini sued against Mr. Grappolini and hiscompany for breach of fiduciary duty.
JUDICIAL OPINION
DENLOW, Magistrate
As agents, Defendants owed Lucini general duties of good faith,loyalty, and trust. In addition, Defendants owed Lucini "fulldisclosure of all relevant facts relating to the transaction oraffecting the subject matter of the agency."
Defendants were Lucini's agents and owed Lucini a fiduciary duty toadvance Lucini's interests, not their own. When Defendants obtainedan exclusive supply agreement with Vegetal for the GrappoliniCompany instead of for Lucini, they were disloyal and breachedtheir fiduciary duties. Lucini suffered substantial damages as aresult of this breach.
Punitive damages are appropriate where the defendant hasintentionally breached a fiduciary duty. Defendants' breach oftheir fiduciary duties was flagrant and intentional. Defendantsdeliberately usurped a corporate opportunity sought by Lucini,which Lucini had entrusted Defendants to secure on Lucini's behalf.Although Defendants explicitly accepted this trust and ensuredLucini that Mr. Grappolini and his company would do as Lucinirequested, Defendants failed to do so and hid this fact fromLucini.
Defendants misappropriated Lucini's valuable trade secrets.Defendants acquired Lucini's trade secrets under circumstancesgiving rise to a duty to maintain their secrecy.
Lucini's decision to focus its LEO project around essential oilsfrom Vegetal Progress was a closely guarded trade secret.
As a proximate result of Defendants' breach of their fiduciaryduties, Lucini suffered lost profits damages of at least $4.17million from selling its grocery line of LEO products from 2000through 2003. The Court will award Lucini its lost profits of$4,170,000, together with its $800,000 of development costs for LEOproject. Defendants engaged in willful and maliciousmisappropriation as evidenced by their use of the information fordirectly competitive purposes and their efforts to hide themisappropriation and, accordingly, the Court will award $1,000,000in exemplary damages. Such an award is necessary to discourageDefendants from engaging in such conduct in the future.
1. Explain how Mr. Grappolini breached his fiduciary duty.