Date: 05-21-2001

Case Style: Bohler-Uddeholm America, Inc. v. Ellwood Group, Inc.

Case Number: 99-3773

Judge: Becker

Court: United States Court of Appeals for the Third Circuit

Plaintiff's Attorney: Vincent J. Connelly, Alan J. Martin, Daniel L. Ring, Eric S. Dreiband, Terri Hoskins, Audrey Fried-Grushcow of Mayer, Brown & Platt, Chicago, Illinois and William M. Wycoff of Pittsburgh, Pennsylvania

Defendant's Attorney: H. Woodruff Turner, Robert B. Sommer, Douglas A. Pearson and David M. Aceto of Kirkpatrick & Lockhart, LLP, Pittsburgh, Pennsylvania

Description: Appeal by defendant Ellwood Group, Inc., (Ellwood) from a final judgment entered against it by the District Court for the Western District of Pennsylvania in favor of plaintiff Uddeholm Tooling AB (Uddeholm). This complicated commercial case emerges from the disintegration of a joint venture entered into by Ellwood, a Pennsylvania corporation in the business of for ging steel ingots into various components of heavy machinery, and Uddeholm, a Swedish company that produces specialty tool steels. Uddeholm brought numerous claims against Ellwood, including breach of contract, breach of fiduciary duty, misappropriation of trade secrets, and civil conspiracy. Resolution of this appeal requires us to address a number of questions of Pennsylvania contract, business tort, and damages law, along with two questions on the application of the Federal Rules of Evidence.

The most important issue involves the question whether the joint venture agreement was ambiguous as a matter of law as to whether Ellwood could properly claim rebates for its sales to third parties of ingots pr oduced by the Ellwood- Uddeholm Steel Company (EUS), the entity formed by the joint venture, or whether Ellwood was limited to rebates for sales by EUS to Ellwood for Ellwood's own use. Uddeholm maintains that the latter interpretation reflects not only the clear intent of the contracting parties but also the raison d'etre of the contract. We conclude that the District Court was correct in finding a contractual ambiguity. We also conclude, however, that it erred in instructing the jury that Ellwood had the burden of establishing the meaning of the disputed terms in the agreement because of the fiduciary relationship between the parties that was created by the joint venture. We must therefore vacate the jury verdict on the contract claim and remand for a new trial.

Other important issues include: (1) whether Uddeholm's breach of fiduciary duty and misappropriation of trade secrets claims were covered and thus precluded by its breach of contract claim; (2) whether Ellwood's potential liability on the civil conspiracy claim was for eclosed because the jury found no other conspirator; (3) whether Uddeholm could recover on its contract claim for rebates Ellwood received in 1991; (4) the inter est rate to be applied to sums Uddeholm owed Ellwood for post-venture purchases of steel; and (5) two evidentiary questions: the admissibility of a document under Fed. R. Evid. 807 (the residual exception to the hearsay rule), and whether the court erred by requiring redaction of an Uddeholm employee's memo before admitting it into evidence. * * *

Outcome: For the foregoing reasons, the Judgment of the District Court will be affirmed in part and vacated in part, and the case remanded to the District Court for pr oceedings consistent with this opinion. Parties to bear their own costs.

Plaintiff's Experts: Unknown

Defendant's Experts: Unknown

Comments: None