HOTMIX ASPHALT EQUIPMENT COMPANY, D/B/A LOUISVILLE DRYER COMPANY; AND HOTMIX ASPHALT EQUIPMENT COMPANY, D/B/A STANSTEEL ASPHALT PLANT PRODUCTS v. RELIABLE ASPHALT PRODUCTS, INC.; RELIABLE ASPHALT, L.L.C. AND JOHN M. REITER HOTMIX ASPHALT EQUIPMENT COMPANY, D/B/A LOUISVILLE DRYER COMPANY; AND HOTMIX ASPHALT EQUIPMENT COMPANY, D/B/A STANSTEEL ASPHALT PLANT PRODUCTS
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RENDERED:
NOVEMBER 7, 2003; 2:00 p.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2002-CA-002289-MR
HOTMIX ASPHALT EQUIPMENT COMPANY,
D/B/A LOUISVILLE DRYER COMPANY; AND
HOTMIX ASPHALT EQUIPMENT COMPANY,
D/B/A STANSTEEL ASPHALT PLANT
PRODUCTS
v.
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE THOMAS J. KNOPF, JUDGE
ACTION NO. 02-CI-004266
RELIABLE ASPHALT PRODUCTS, INC.;
RELIABLE ASPHALT, L.L.C. AND
JOHN M. REITER
AND:
APPELLEES
NO. 2002-CA-002558-MR
HOTMIX ASPHALT EQUIPMENT COMPANY,
D/B/A LOUISVILLE DRYER COMPANY; AND
HOTMIX ASPHALT EQUIPMENT COMPANY,
D/B/A STANSTEEL ASPHALT PLANT
PRODUCTS
v.
APPELLANTS
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE THOMAS J. KNOPF, JUDGE
ACTION NO. 02-CI-004266
APPELLANTS
RELIABLE ASPHALT PRODUCTS, INC.;
RELIABLE ASPHALT, L.L.C. AND
JOHN M. REITER
APPELLEES
OPINION
AFFIRMING BOTH APPEALS
** ** ** ** **
BEFORE:
BARBER, GUIDUGLI AND PAISLEY, JUDGES.
GUIDUGLI, JUDGE.
Hotmix Asphalt Equipment Company, d/b/a
Louisville Dryer Company and d/b/a Stansteel Asphalt Plant
Products (hereinafter “Hotmix”) appeal the November 18, 2002,
order entered by the Jefferson Circuit Court dismissing its
action against Reliable Asphalt Products, Inc., Reliable
Asphalt, L.L.C., (hereinafter “RAP”) and John M. Reiter
(hereinafter “Reiter”).1
The order dismissing the original
action also rendered Hotmix’s motion for a temporary injunction
pursuant to CR 65.04 moot.
We affirm.
1
Hotmix filed its notice of appeal in case No. 2002-CA-002289-MR on October
31, 2002, following the Jefferson Circuit Court order dated October 9, 2002.
However, the record indicates the order was not “entered” until November 18,
2002. Hotmix filed a subsequent notice of appeal on December 13, 2002 (case
number 2002-CA-002558-MR), to remove any argument that the first appeal was
premature or taken from a non-final order. Both appeals (which essentially
are only one appeal) will be addressed herein.
-2-
Hotmix had filed its complaint for injunctive relief
and damages against RAP and Reiter on June 7, 2002.2
On June 12,
2002, Hotmix filed its motion for issuance of a temporary
injunction.
Following limited discovery and the taking of
several depositions, a hearing on the motion for temporary
injunction was held on September 5 and 6, 2002.
At that time,
Appellees raised the issue that Hotmix was not the proper party
to pursue this action, but rather that ContractorsHeaven.com,
Inc. (hereinafter “ContractorsHeaven”) was the actual owner of
the property rights in question.
Following the hearing, the
Jefferson Circuit Court determined that based upon the “License
Agreement” between ContractorsHeaven and Hotmix that
ContractorsHeaven was, in fact, the real party in interest and
that Hotmix was not the proper party to bring this action
against RAP and Reiter.
As such, the circuit court dismissed
the complaint and found the motion for injunctive relief to be
moot.
This appeal followed.
In that Jefferson Circuit Court Judge Thomas J.
Knopf’s Findings of Fact, Conclusions of Law, and Order
thoroughly and concisely address the facts of the case and the
issue raised by Hotmix, we adopt his order as our own as
follows:
2
The original complaint named only Reiter and Reliable Asphalt Products, Inc.
Subsequently, on July 3, 2002, Hotmix filed an amended complaint to name
Reliable Asphalt, L.L.C. as a party. RAP is the successor to Reliable
Asphalt, L.L.C.
-3-
FINDINGS OF FACT, CONCLUSIONS OF LAW, AND
ORDER
This matter came before the Court on
September 5 and 6, 2002, for a hearing on a
motion brought by Plaintiff, Hotmix Asphalt
Equipment Company d/b/a Louisville Dryer
Company and d/b/a Stansteel Asphalt Plant
Products (“Hotmix”), for a temporary
injunction pursuant to CR 65.04.
BACKGROUND SUMMARY
In May of 1993, John M. Reiter began to
work for GenTec Equipment Company (“GenTec”)
as a drafter until January of 2000. After
that, he did some part-time contract work
for GenTec and others out of his home. In
May of 2000, Mr. Reiter went to work for
Louisville Dryer Company (“LDC”). On June
7, 2000, he signed a noncompetition and
confidentiality agreement with LDC.
In August of 2000, LDC was merged into
GenTec, with GenTec being the surviving
corporation. Both of these corporations,
among others, were owned by Leonard A.
Loesch. In December of 2000, GenTec began
to have financial difficulties. Its
creditor, Bank One, Kentucky, NA (“Bank
One”), filed a foreclosure action. At a
public sale, Bank One brought the assets,
which it subsequently sold on December 3,
2001 to ContractorsHeaven.com,Inc. (another
corporation owned by Mr. Loesch). On
January 17, 2002, ContractorsHeaven.com,
Inc. entered into a license agreement with
Hotmix for the right to use certain of its
intellectual property.
On April 19, 2002, Mr. Reiter was fired
from his drafting job for misappropriating
portions of various GenTec drawings. At the
time he was fired, Mr. Reiter was allegedly
being paid by Hotmix. On June 7, 2002,
Hotmix filed suit against Mr. Reiter and
Reliable Asphalt Products, Inc.
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(“Reliable”), seeking injunctive relief and
damages. On June 12, 2002, Hotmix filed a
motion for a temporary injunction. On
August 13, 2002, Hotmix was given leave to
amend its complaint to add Reliable Asphalt,
LLC as a defendant. Reliable Asphalt
Products, Inc. is the successor to Reliable
Asphalt, LLC.
A hearing on the motion for a temporary
injunction was held on September 5 and 6,
2002. Four witnesses testified at the
hearing: Gary Catlett (engineer employed by
Hotmix), Mr. Reiter, Chet Reinle (employee
of Reliable and former employee of GenTec
and ContractorsHeaven.com, Inc.), and
Michael Mercer (president of Hotmix). On
September 11, 2002, Hotmix submitted various
authorities to the Court, as did Reliable on
September 13, 2002.
FINDINGS OF FACT
Hotmix called one of its engineers as
its first witness. Mr. Catlett went through
a series of slides (Plaintiff’s Exhibit # 1)
to show that Mr. Reiter had cut and pasted
portions of GenTec drawings and incorporated
them into drawings he provided to Reliable,
a competitor of Hotmix. Mr. Catlett was
among a group that went to Mr. Reiter’s home
and was given access to his computer. He
testified that Mr. Reiter was cooperative
and they took eighty drawings from his
house.
Mr. Reiter was the next witness. He
testified that he drafted drawing parts and
components and has a two-year associate
degree in drafting. He agreed that his
signature is on the June 7, 2000
noncompetition and confidentiality
agreement, but he does not think that he
read the agreement before signing it. (See
Plaintiff’s Exhibit # 3). He agreed that he
used some portions of the drawings he did
for GenTec to make drawings for Reliable.
-5-
He testified that he did thousands of
drawings for GenTec and they all had a
GenTec title block on them. He further
stated that no one at Reliable asked him for
GenTec drawings but just asked him to do
drafting work on a job.
The third witness to testify was Mr.
Reinle. He testified that he originally
started in August of 1998 to work for
GenTec, which subsequently changed into
ContractorsHeaven.com, Inc., from which he
resigned in April of 2000. In December of
2000, he went to work for Reliable when it
started-up as the one with the technical
knowledge. He stated that when he received
a job and needed someone to create a drawing
he sometimes contacted Mr. Reiter, who he
knew to be an excellent draftsman. He also
contacted Mr. Reiter when Reliable needed
some sort of flight drawings (i.e.,
standard, generic type) which he thought Mr.
Reiter could do from memory since he used
them so often or could look up in books what
was needed. A few times, Mr. Reinle
provided Mr. Reiter with the necessary
measurements or he sent Mr. Reinle out to
measure. Mr. Reinle further testified that
he never asked Mr. Reiter to go to GenTec
and get drawings.
It was also Mr. Reiter’s testimony that
GenTec had drawings of other competitors in
the industry. He stated that only a short
time ago, he was at a customer site that was
having problems with GenTec equipment and
the customer had a GenTec drawing for the
equipment.
The last witness was Mr. Mercer, an
attorney and the president of Hotmix. He is
also an officer of ContractorsHeaven.com,
Inc. He testified that the drawings are of
great benefit because it allows the company
to immediately respond to a customer. He
stated that a propriety stamp is put on all
-6-
drawings and documents and is recognized in
the trade as ownership.
Mr. Mercer testified that LDC merged
into GenTec in August of 2000; some of the
employees were moved over to Stansteel
Asphalt Plant Products; and in December of
2000, the employees from GenTec and
Stansteel Asphalt Plant Products were moved
to Hotmix, including Mr. Reiter. He also
testified that ContractorsHeaven.com, Inc.
acquired all the assets of GenTec, including
the drawings from Bank One, which were
subsequently licensed to Hotmix.
Plaintiff’s Exhibit #2 included the
licensing agreement, which contains the
following relevant language:
This License Agreement
(“Agreement”) is entered into and
effective as of January 17, 2002,
by and between
ContractorsHeaven.com, Inc., a
Kentucky corporation
(“Licensor”), and Hotmix Asphalt
Equipment Company, a Kentucky
corporation (“License”).
Recitals:
A. Licensor is the owner of and
has sole and exclusive rights to
use the following intellectual
property (the “Property”):
“Property” shall mean (i) all
trade names, trademarks …, service
marks and variations thereof
utilized by Licensee prior to
December 3, 2001 in conducting its
Louisville Dryer Company, First
Thermal Heater and First Thermal
Systems businesses (“Businesses”),
together with the goodwill
associated with such trade names,
trademarks and service marks and
the Businesses…, (ii) all customer
-7-
lists, customer files, telephone
numbers, sales and advertising
materials, sales records,
literature, technical information,
trade secrets, process data,
licenses and know-how relating to
the Businesses, and (iv) all of
the written contracts, agreements,
commitments, understandings and
instruments relating to the
Businesses and all books and
records relating to the
Businesses.
…
Agreement:
Now, Therefore, the parties hereby
agree as follows:
1. Grant of License. Licensor
hereby grants to Licensee a
nonexclusive, non-assignable, nontransferable, non-sublicensable
right and license (“License”) to
use the property during the “Term”
(as defined in Section 2) in
connection with its business. …
5. Scope of License. …Licensee
shall have no rights with respect
to the Property other than the
limited and specific rights
licensed hereunder.
…
8. Ownership. Licensee hereby
confirms Licensor’s ownership of
the Property. Licensee shall not
have any right, title or interest
in the Property, other than the
right to use the Property during
the Term as set forth in this
Agreement, and nothing contained
herein shall be construed to grant
-8-
or assign to Licensee any
additional right, title or
interest in the property. …
9. Protection of the Property.
Licensee shall cooperate fully
with Licensor for the purpose of
securing, preserving and
protecting Licensor’s rights in
and to the Property and preventing
any infringement thereof.
Licensee shall notify Licensor in
writing immediately of any actual
or potential infringements or
imitations by others for the
property and of all actual or
potential violations of Licensor’s
rights in and to the Property of
which Licensee has actual
knowledge, and Licensor shall have
the sole right to determine
whether any action shall be taken
on account of any such actual or
potential infringements,
limitations or violations.
Licensor shall have the sole right
(but not obligation) to commence
or prosecute any demands, claims
or suits related to the Property
in its own name and any recovery
shall belong to the Licensor.
(Emphasis in original).
It was Mr. Mercer’s testimony that the
licensor (ContractorsHeaven.com, Inc.)
requested that Hotmix, as licensee, bring
this lawsuit since Mr. Reiter was a Hotmix
employee at the time he misappropriated the
drawings. One Reliable drawing was drawn by
Mr. Reiter in March of 2002. The rest were
drawn in December of 2000.
CONCLUSIONS OF LAW
-9-
The initial argument presented by Mr.
Reiter and Reliable is that this lawsuit
seeking a temporary injunction is being
pursued by the wrong plaintiff. They
contend that the license agreement
specifically gives the licensor
(ContractorsHeaven.com, Inc.) the sole right
to sue for any infringement and provides
that any recovery belongs solely to the
licensor. Hotmix argues that it brought the
suit at the request of
ContractorsHeaven.com, Inc.
The construction, meaning, and legal
effect of a written instrument are matters
of law for the court. Morganfield National
Bank v. Damien Elder & Sons, Ky., 836 S.W.2d
893 (1992). The agreement gives Hotmix a
license to use certain intellectual property
owned by ContractorsHeaven.com, Inc. The
agreement defines said intellectual property
and limits it to three particular companies:
LDC, First Thermal Heater and First Thermal
Systems. GenTec is not mentioned, even
though it was the surviving corporation when
merged with LDC in 2000. The drawings at
issue in this suit were drawn by Mr. Reiter
using portions of GenTec drawings.
Even if the agreement could be
construed to give Hotmix a license to use
the unmentioned GenTec drawings (if they
somehow belonged to the business of LDC,
First Thermal Heater, or First Thermal
Systems), all but one of the drawings at
issue were drawn for Reliable prior to the
effective date of the License Agreement.
The plain language of the agreement clearly
expresses that ContractorsHeaven.com, Inc.
has the right to bring suit for any
infringement of the licensed intellectual
property and the recovery from any such
infringement belongs solely to
ContractorsHeaven.com, Inc.
Consequently, the Court agrees with the
defendants that the claims of infringement
-10-
and theft in this lawsuit belong to
ContractorsHeaven.com, Inc. and cannot be
brought in the name of Hotmix
notwithstanding any agreement between the
two to the contrary. (It should be noted
that there is no pending claim in this suit
for breach of Mr. Reiter’s noncompetition
and confidentiality agreement.) Given that
this action filed by Hotmix must be
dismissed, the request for temporary
injunctive relief during the pendency of
said action is rendered moot.
Therefore, the Court enters the
following Order:
ORDER
IT IS HEREBY ORDERED AND ADJUDGED that:
(1) the action brought by Plaintiff,
Hotmix, Asphalt Equipment Company d/b/a
Louisville Dryer Company and d/b/a Stansteel
Asphalt Plant Products, against Defendants
Reliable Asphalt Products, Inc., Reliable
Asphalt, LLC, and John M. Reiter, is
DISMISSED; and
(2) Plaintiff’s motion for a temporary
injunction pursuant to CR 65.04 is rendered
MOOT.
Dated this 9th day of October, 2002.
/S/ Thomas J. Knopf
THOMAS J. KNOPF, JUDGE
Jefferson Circuit Court
On appeal, Hotmix contends that the trial court erred
in dismissing its complaint.
It argues that the testimony of
Michael Mercer clearly presents evidence that ContractorsHeaven
and Hotmix modified the original agreement to permit Hotmix to
pursue this action against RAP and Reiter.
-11-
While we agree with
Hotmix’s contention as set forth in Glass v. Bryant, Ky., 194
S.W.2d 390, 391 (1946), that “[a] simple contract in writing may
be modified or rescinded by a subsequent parol agreement,
although the evidence of such modification or rescission must be
clear and convincing,” we do not accept its conclusion that
Hotmix therefore is the proper party to bring this action.
The
License Agreement entered between ContractorsHeaven and Hotmix
gives Hotmix the right to use property owned by
ContractorsHeaven.
of the property.
The only interest Hotmix has is in the use
It has no ownership rights to the property.
Although Hotmix contends it is the real party in
interest in that it will suffer the injury by Appellees’ alleged
action, we find nothing in the law nor has Hotmix directed us to
any law which would permit it to, in fact, become the real party
in interest.
ContractorsHeaven is the owner of the property
rights in question.
Why it has not pursued its ownership rights
or its obligation under the agreement is unknown and need not be
addressed herein.
It may be that Hotmix has a legal remedy
against ContractorsHeaven for not exercising its rights, but
again, that issue is not before this Court.
The only issue
before this Court is whether Hotmix can maintain an action
against RAD or Reiter, and we believe the trial court properly
answered that question in the negative based upon the evidence
-12-
presented, the license agreement and the legal rights of the
parties.
For the foregoing reasons, the order of the Jefferson
Circuit Court dismissing the action filed by Hotmix is affirmed.
ALL CONCUR.
BRIEF FOR APPELLANT:
F. Larkin Fore
Louisville, KY
BRIEF FOR APPELLEES, RELIABLE
ASPHALT PRODUCTS, INC AND
RELIABLE ASPHALT, L.L.C.:
Eugene L. Mosley
Louisville, KY
BRIEF FOR APPELLEE, JOHN M.
REITER:
Cheryl E. Bruner
R. Kenyon Meyer
Louisville, KY
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