A lawsuit by a Kansas City packaging company that alleged two Jefferson City area businesses stole trade secrets was dismissed more than a month ago after all parties asked a judge to throw the case out.
In March, Kansas City-based flexible packaging manufacturer Gateway Packaging sued Meta-based Schell & Kampeter, which manufactures pet foods under the Diamond Pet Foods brand, and Morris Converting, which makes flexible packaging at its Jefferson City factory on Algoa Road.
The U.S. District Court for the Western District of Missouri dismissed the case after Gateway Packaging and defendants Morris Packaging, Schell & Kampeter and two former Gateway employees asked the court to dismiss the case Oct. 5.
The court granted their request Oct. 18.
Michael Fielding, an attorney for Gateway Packaging at Kansas City law firm Husch Blackwell, declined to comment. Kent Lowry, an attorney at Jefferson City law firm Armstrong Teasdale who represented Schell & Kampeter, declined to say if the parties reached a settlement because the terms of the resolution are confidential. Lowry declined to comment further.
In the lawsuit, Gateway had asked the court to award it at least $9.8 million in damages plus $9.8 million in damages for enrichment on the part of the defendants and for exemplary damages in the amount of twice the sum awarded to Gateway. The complaint also sought to impose a royalty on all past and present sales of specialty dog food bags made by Morris Packaging.
In court filings, Gateway alleged Morris Converting, a subsidiary of Morris Packaging, stole trade secrets used to manufacture 40-pound Costco dog food bags. Prior to 2013, Diamond purchased most of its flexible packaging material from Morris, which Diamond used to package Kirkland brand dog food. Costco wanted more durable bags resistant to puncturing by shopping carts, the complaint said.
The suit also alleged former Gateway employees Joseph Fiore and Greg Below used proprietary information to help Morris Packaging develop a competing bag. While working at Gateway, Fiore and Below were copied on internal emails that showed specifications for a new bag Gateway developed for Kirkland brand dog food in 2014, the complaint alleged.
“Both Diamond and Morris knew that Below and Fiore possessed critical information regarding Gateway’s trade secrets,” the complaint said. “They also knew that Morris lacked sufficient knowledge to viably produce a hybrid bag to be used for Costco.”
In 2014, Gateway began a two-year process of developing the bags, it said in the complaint. Gateway spent at least $2 million developing a new bag with an outer nylon shell and paper lining that looked good, but could also be used on nine lines at four Diamond Plants, the complaint said. Revenues from the new bags increased from $400,000 in 2014 to $4.6 million in 2015 and $8 million in 2016.
Diamond ended its relationship with Gateway on March 1. The suit alleged Morris began producing similar bags for Diamond weeks after Fiore left Gateway for Morris in November 2016 and Below left Gateway for Morris in March 2017.
Below and Fiore violated non-disclosure agreements they signed with Gateway by disclosing Gateway’s trade secrets, the complaint alleged.
“It would’ve been impossible for Below and Fiore to have viably functioned in their respective new jobs at Morris without using Gateway’s trade secrets and confidential information that they obtained while employed at Gateway,” the complaint said. “Morris could not have so quickly engineered and produced this bag without the aid of Below and the trade secrets he learned at Gateway.”
In a motion to dismiss the case filed April 3, Lowry said the case did not have merit and the technique of making the bag was commonly known.
“There are simply no facts to suggest that Diamond had any reason to conspire to break the law in order to shift its business back to Morris, let alone any facts demonstrating that Diamond took any steps in furtherance of such a conspiracy,” Lowry wrote in April.