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Logixx Automation9/12/2002
JUDGMENT AFFIRMED AND CASE REMANDED WITH DIRECTIONS
Dailey and Plank, JJ., concur
In this dispute involving a covenant not to compete and the design and manufacture of machinery used to make illuminated signs, defendants, the Lawrence Michels Family Trust and the Estate of Lawrence Michels (Michels), appeal the judgment entered on a jury verdict in favor of plaintiffs, Logixx Automation, Inc. and Laser Products, Inc. (companies), for breach of contract and conspiracy. We affirm and remand for an award of the companies' attorney fees associated with this appeal.
I. Background
At issue in this case is a product called the Preformer, a machine that automates the production of neon signs made of metal letters called "returns." It includes three components: an uncoiler, a roll former, and a notcher. These three components manipulate metal sheets into the form of letters for signs. The notcher component includes a computer software package.
During the 1990s, the companies designed, built, marketed, sold, and leased the Preformer, distributing forty-four of them. The product's sales price was approximately $150,000 per unit.
In the early 1990s, Lawrence Michels joined the boards of directors of the companies, serving until 1995. He, among others, including another member of the boards, subsequently filed an involuntary Chapter 11 bankruptcy proceeding against the companies. The companies opposed the bankruptcy proceeding on the basis that they did not owe Michels and the other board member any money and that they were not insolvent. The companies also filed a complaint against Michels and the other board member for business interference.
Michels, the other board member, and the companies ultimately settled the bankruptcy dispute in February 1996. In return for the companies' purchase of their stock, Michels and the other board member signed a covenant not to compete. As pertinent to this appeal, the covenant not to compete included the following terms:
(b) He, she or it shall not, for a period of three (3) years from the date of Closing:
(iv) engage, directly or for hire, as a proprietor, stockholder, partner, director, officer, employee, independent contractor or otherwise, design, build, sell, distribute or market any:
(I) roll forming machine for metal fabrication;
(II) bending machine for bending random shapes and random sizes in metal fabrication;
(III) bending machine for neon tubes;
(IV) creasing machine for metal fabrication;
(V) software directly competitive with the "Logixx Programmer"; or
(VI) software of any kind incorporate "Roman curves."
The settlement agreement also prohibited Michels from influencing any employees of the companies to leave their employment to work for a competitor and from using any confidential information from the companies. The agreement also required that Michels return to the companies all confidential information related to the Preformer.
In March 1996, Michels and the other board member formed a partnership that eventually developed a machine called the "Return Shop," which utilized computer software to cut notches in sheet metal to make signs. It also included other components that bent and facilitated uncoiling the metal. The Return Shop was distributed through Arete Corporation, a company formed by Michels and the other board member. The Return Shop was significantly smaller than the Preformer and sold for approximately $60,000 per unit. Arete began selling the Return Shop in 1998.
In 1999, the companies filed this suit aga
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