Film and bag maker Mercury Plastics Inc. has won a $16.5 million judgment against former employees who started a competing company.
Mercury, of City of Industry, Calif., was awarded the judgment at a jury trial ended Jan. 25. The jury found certain former Mercury employees breached their fiduciary duty and engaged in conspiracy, in setting up packaging broker Infinity Packaging Inc. of Salinas, Calif.
``Finally justice was served,'' Mercury President Benjamin Deutsch said in a telephone interview. ``What they did was very harmful to Mercury.''
Luben Rabchev, formerly president of Mercury, and John Nakaoka, a former board member, led the launch of Infinity in 2003. The men resigned from Mercury in July of that same year and were sued by the bag maker shortly afterward, when it became clear they had formed a competing company.
Several other employees, including sales personnel, also were involved in Infinity and tendered their resignations around that time.
In November 2004, a summary judgment dismissed the defendants of all charges, according to Infinity's lawyer, Marc Forsythe. About a year later, the California Court of Appeals overturned that judgment, allowing the case to go to trial.
Meanwhile, Mercury was experiencing financial trouble, and the company filed for Chapter 11 bankruptcy protection in 2005. However, the business was saved by mega film manufacturer Sigma Plastics Group of Lyndhurst, N.J., when Sigma's Alpha Industries Inc. subsidiary formed a joint venture with the Deutsch family; the reorganized company is called New Mercury Plastics LLC.
Benjamin Deutsch said the creation of Infinity was part of the reason his company went bankrupt.
``We lost a lot of volume,'' he said.
The trial began Jan. 7. A jury found that Rabchev and Nakaoka had breached their fiduciary duty, and set damages at $16.5 million. The two defendants and Infinity were found guilty of conspiracy, but they, along with the other defendants, were exonerated on counts of misappropriation of trade secrets and interference with economic advantage.
Also at the trial, Mercury President Benjamin Deutsch and related parties were found not guilty of breaching fiduciary duty to Rabchev.
A Superior Court Judge later issued a stay of enforcement of the jury judgment pending the defendants' motion to overturn the verdict on various grounds. Subsequently, the defendants applied for a new trial.
Mercury employs about 250 in City of Industry. The company also has subsidiaries in Salamanca, Mexico, and Santiago, Chile.