Calvary Industries, Inc. v. Winters

CourtDistrict Court, S.D. Ohio
DecidedJanuary 30, 2023
Docket1:23-cv-00001
StatusUnknown

This text of Calvary Industries, Inc. v. Winters (Calvary Industries, Inc. v. Winters) is published on Counsel Stack Legal Research, covering District Court, S.D. Ohio primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Calvary Industries, Inc. v. Winters, (S.D. Ohio 2023).

Opinion

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

CALVARY INDUSTRIES, INC., : Case No. 1:23-cv-1 : Plaintiff, : Judge Timothy S. Black : vs. : : JONATHAN K. WINTERS, JIM : EPSTEIN, EVAN EPSTEIN, and THOR : CUSTOM STEEL COATINGS, LLC, : : Defendants. :

ORDER GRANTING PLAINTIFF’S MOTION TO REMAND (Doc. 10)

This civil case is before the Court on Plaintiff Calvary Industries, Inc.’s (“Calvary” or “Plaintiff”) motion to remand (Doc. 10) and the parties’ responsive memoranda (Docs. 12, 15). I. BACKGROUND A. Factual Background1 1. Calvary and Winters discuss developing a ceramic coating Calvary is a chemical manufacturing company in Butler County, Ohio. (Doc. 2 at ¶ 10). In early spring of 2018, Defendant Jonathan K. Winters (“Winters”) and Calvary’s Vice President and Director of Product Development, Chris Berger (“Berger”), began having conversations about an idea Winters had for a ceramic coating that Winters

1 The facts are taken from the allegations in the Verified Complaint for Temporary, Preliminary, and Permanent Injunctive Relief and Damages, as filed in the Butler County Court of Common Pleas (Doc. 2) (the “Complaint”). believed would prevent steel from oxidizing during the hot stamping process used in manufacturing steel parts for automobiles (the “ceramic coating”). (Id. at ¶¶ 13, 14). At

the time, Winters did not have a formula or any samples of this proposed coating; it was merely a concept. (Id. at ¶ 14). On October 9, 2018, Calvary hired Winters as a product developer and technical representative. (Id. at ¶ 15). Winters would perform two primary roles at Calvary: (1) work with Calvary’s engineers, using Calvary’s laboratory and equipment, to help develop the concept of the ceramic coating; and (2) generate sales for the ceramic coating and other Calvary chemicals. (Id. at ¶ 16).

2. Calvary and Winters enter into an agent agreement In October of 2018, Calvary and Winters entered into an agreement (the “Agent Agreement”). (Id. at ¶ 17; id. at Ex. A, PageId 29-34). Under the Agent Agreement, for the first two years of the relationship, Winters would receive a 50% share of the gross profits from products that he helped develop and sell, with that percentage reduced to

31% after two years. (Id. at ¶ 17). The Agent Agreement also provided, in relevant part, that: any intellectual property developed during the relationship would belong to Calvary; Winters was not to disclose or use for his own benefit any confidential information “whether patentable or not”; and during and for 18 months immediately following the termination of Winters’ agent status, he was not to solicit, offer to sell, or sell any

products or provide any services that compete with or displace Calvary’s products or services to customers who were provided Calvary products or services at any time during the 18 months preceding termination. (Id. at ¶ 18; id. at Ex. A, PageId 29-30). Calvary invested thousands of dollars in new equipment and supplies, and devoted its other resources, including existing equipment and personnel, towards developing the

ceramic coating. (Id. at ¶ 19). Although Winters performed some work towards developing the formula for the ceramic coating, the vast majority of work was performed by Berger. (Id. at ¶ 20). At most, Winters showed up to work at Calvary’s facilities approximately five days per month. (Id. at ¶ 20). On those days, Berger would cease work on other projects and work side-by-side with Winters to develop the ceramic coating. (Id. at ¶ 21).

By spring of 2020, Winters was performing only limited work for Calvary; so, as permitted by the Agent Agreement, Calvary ceased paying Winters draws against future sales and instead paid him the agreed upon gross profits that were generated from the other products he worked on and sold. (Id. at ¶ 25). Berger continued to work on, and make key revisions to, the formula for the ceramic coating. (Id. at ¶ 26).

3. Calvary and Thor pursue a joint venture In the summer or fall of 2020, Winters approached Jim Epstein (“Jim”) and Evan Epstein (“Evan”) about working with him on the ceramic coating. (Id. at ¶¶ 27, 30). In so doing, Winters disclosed the developments made at Calvary without Calvary’s knowledge or consent, in violation of the Agent Agreement. (Id. at ¶ 31). Winters, Jim,

and Evan, without Calvary, did not have the equipment or facilities to develop chemical compounds such as the ceramic coating. (Id. at ¶ 33). In the fall of 2020, Jim called Berger and informed him that he was working with Winters on the ceramic coating, and asked about partnering with Calvary to develop and produce it. (Id. at ¶ 34). Calvary was dismayed that Winters had disclosed confidential information about the coating to third parties in violation of the Agent Agreement, but

was interested in working with Jim and Winters based on their connections at Nucor Steel (“Nucor”), a potential customer. (Id. at ¶ 35). On December 30, 2020, Jim, Evan, and Winters formed Defendant Thor Custom Steel Coatings, LLC (“Thor”) (collectively, “Defendants”) as an Indiana LLC. (Id. at ¶ 36). Calvary and Defendants agreed to operate as a joint venture, sharing equally in all costs and expenses of developing the ceramic coating, and sharing equally in any profits

from it. (Id. at ¶ 38). 4. The ceramic coating is successfully developed By August 2021, without any meaningful input from Winters or Thor, Calvary further developed the ceramic coating and had a breakthrough adhering it to steel. (Id. at ¶ 40). That month, Calvary provided samples to Nucor, but the ceramic coating failed to

cure properly. (Id. at ¶ 41). Jim and Berger communicated regarding a potential fix. (Id. at ¶ 41). Berger continued to make further modifications and ultimately succeeded in creating a formula that adhered to steel and withstood testing under extremely high temperatures. (Id. at ¶¶ 42, 43). Berger notified Nucor, and on September 1, 2021, Berger and Winters attended Nucor’s test, which was a success. (Id. at ¶ 46).

For several weeks prior to the successful test, Thor had promised to prepare a more formal written agreement memorializing the joint venture between Thor and Calvary, but did not send one until October 20, 2021. (Id. at ¶¶ 47, 48). The draft agreement did not reflect what the parties had initially agreed, but instead misrepresented Thor as the sole owner of the ceramic coating and relegated Calvary to the role of supplier. (Id. at ¶ 48). Upon Calvary’s disapproval, Evan agreed to redraft, but never

sent a revised agreement to Calvary. (Id. at ¶¶ 49-51). In the meantime, Winters made repeated requests to Berger to provide the revised formula that Berger had successfully developed. (Id. at ¶ 53). 5. Calvary discovers Thor’s patent application for a coating technology On September 19, 2022, Calvary learned that, on February 23, 2021, Thor had filed a provisional patent application for a coating technology that incorporated

confidential and trade secret information developed by Calvary under the Agent Agreement. (Id. at ¶ 57). This provisional patent listed Winters as the sole inventor. (Id. at ¶ 57). The formula described in Thor’s provisional patent is materially different from the formula for the ceramic coating that Calvary produced and that was successfully tested on Nucor’s coil. (Id. at ¶ 57).

On October 20, 2022, the parties met in a final effort to memorialize the joint venture agreement. (Id. at ¶ 58). At this meeting, it became clear that Defendants intended to claim Calvary’s intellectual property as their own. (Id. at ¶ 58). And, despite this dispute over ownership, Defendants were still attempting to contract with Nucor and/or Ford to sell or license the ceramic coating. (Id. at ¶ 59).

B.

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