Russell T. Gilbert, founder and former owner of Cimco Inc., filed a multimillion-dollar suit against M.A. Hanna Co. in a dispute over Gilbert's failed attempt to repurchase Cimco's custom injection molding division. The suit, filed March 19 in Superior Court in Orange County, Calif., charges Hanna and its wholly owned subsidiary Hanwest Inc. of promissory fraud, rescission, two complaints of breach of contract, breach of fiduciary duty and intentional infliction of emotional distress. It seeks relief on two of the complaints of more than $1 million, and compensatory, exemplary and punitive damages to be determined at trial.
Lawyers for Hanna filed a demurrer to Gilbert's complaint, contending the complaint lacked sufficient facts or precedents to proceed. A hearing was scheduled for May 30.
In September, Gilbert and Cimco's board of directors agreed to sell the entire company to Cleveland-based Hanna for about $34 million. Hanna's primary interest was in Compounding Technologies Inc., a custom compounder of engineering resins in Corona, Calif.
At that time, Gilbert said Hanna, a major compounder and resin distributor, agreed to sell him back the Cimco custom injection molding unit, based in Costa Mesa, Calif.
In February, negotiations on the repurchase deal fell apart and Hanna began entertaining offers from other parties.
Although the acquisition contract contained no stipulations obligating Hanna to sell Cimco back to Gilbert, a Hanna spokes-man said in a March interview that Gilbert was promised a ``pre-empted position'' in negotiations to repurchase the company. Last fall, the same spokesman said Hanna orally had agreed tentatively to sell Cimco's molding division back to Gilbert.
Gilbert's suit argues that Hanna promised to put the repurchase deal in writing following the execution of the merger agreement between Cimco and Hanwest.
Gilbert, who put together a company called Nucim Inc. to repurchase the molding division, said he obtained financing and was ready to complete the repurchase Feb. 9, when Hanna executives upped the ante to more than he was willing to pay.
Gilbert said the original figure discussed with Hanna included $6 million from Gilbert for a 51 percent share of the business. The balance of the shares would have been bought by investors and employees, for a total purchase price of $18 million.According to some sources familiar with Cimco, Hanna's asking price for the molding operations, which include a molding facility in Dayton, Nev., is now $25 million.
Gilbert said he had felt confident that the oral agreements he had with Hanna would allow him to purchase the operations.
``The understanding I had with [Martin D. Walker] was, once the deal [to purchase Cimco] was closed, I'd acquire the [custom molding] company at the price we'd agreed upon in negotiations,'' he said in a telephone interview.
According to records Gilbert filed with the court, Gilbert telephoned Walker, Hanna's chairman and chief executive officer, on Dec. 18, the night before Gilbert was to complete the sale of his stock. Gilbert called to confirm Hanna's agreement to sell the molding division back to him. In that telephone call, Walker told Gilbert, ``Russ, you have my word on it,'' Gilbert said.
Hanna spokeswoman Barb Gould said Gilbert ``believes that we did not bargain in good faith with him in the sale of the molding operations business, but we feel that we did.'' Gould said Gilbert was unable to secure financing by early March,
Gilbert disagreed: ``I had the money in the bank and was ready to write the check when at the last minute, [Walker] said after getting more input on the company, I'd have to come up with more money.''
Obtaining additional funds would have taken weeks, Gilbert said, and Hanna was not willing to wait. Gilbert said Hanna invited him to bid, and told him to contact the investment banking firm handling the sale to obtain a bidder's book and sign a confidentiality agreement.
However, Gilbert said that when he received the agreement, it contained many restraints with regard to his ever doing business again if he failed to submit the highest bid that he declined.
``For what I would have had to give up, it wasn't worth getting the book,'' said Gilbert. ``Besides, it was my company. There's nothing in that book that I didn't already know.''
Gould said Hanna has received several offers and is negotiating with unnamed bidders, who are performing due diligence.
On Feb. 12, David A. Krinsky, one of Gilbert's lawyers, sent a letter to Hanna regarding Gil-bert's legal recourse. Krinsky also enclosed a check for $16,586, representing the first of 12 equal monthly installments.
The letter also stated that although Gilbert was ready and able to perform his duties at the molding division, he was asked by Hanna officials to stay away from his office for ``a couple of days.'' According to court records Gilbert filed, Hanna then fired him ``in retaliation for asserting his right to acquire Cimco's molding division.''
``In conjunction with such termination, [Hanna] took several steps to humiliate and belittle Mr. Gilbert in front of Cimco's em-ployees, including evicting Mr. Gilbert from his office of 37 years as president and chief executive officer for Cimco, changing the locks on the doors to his office during regular business hours in plain view of all the employees, and forcing him to return to his office to gather his personal belongings during business hours in the presence of security personnel hired by [Hanna],'' Gil-bert's records state.
Gilbert had expected to remain in Hanna's employ on a short-term basis to assist with the transition until the written agreement between himself and Hanna could be finalized and the purchase of the molding operations from Hanna completed, according to Gilbert's lawyers.
``I went to a tremendous amount of work putting this thing together,'' Gilbert said, ``and basically I feel that I should recover my investment, my costs.''