Reference no: EM132196435

1. Explain how Mr. Grappolini breached his fiduciary duty. 2. What lessons can you learn about contracts, suppliers, and product launches from the case? 3. Evaluate the ethics of Mr. Grappolini's conduct. Why did Vegetal's officers refer to Mr. Grappolini as a "bad boy"?

Referenece:

FACTS: Mr. Frigo hired Mr. Grappolini as a consultant for his Lucini company, a company that developed high-end olive oils for sale in the United States. Mr. Grappolini was to negotiate a supply contract with Vegetal for its olive oil, one that was necessary for use in creating a flavored olive oil Frigo was developing (the LEO project).

With the LEO product launch approaching, and no copy of the alleged Vegetal supply contract available, Mr. Frigo had Lucini’s lawyer in Italy contact Vegetal directly for a copy. The lawyer learned that Vegetal had a supply contract, but the contract was with Mr. Grappolini’s company and that it was not transferable to Lucini. Mr. Frigo then confronted the officers of Vegetal they acknowledged that they had negotiated with Mr. Grappolini for his company, not for Lucini and were not aware of Lucini’s needs or Mr. Grappolini’s representation of Lucini. The officers at Vegetal said that Grappolini had been a “bad boy” in negotiating the contract for himself. Vegetal agreed to supply Lucini with olive oil in the future, but could not deliver it in time for the launch of Lucini’s new line. The soonest it could deliver would be after the next harvest, a time that meant the marketing and sales plans of Lucini for its new product had been wasted.

Mr. Frigo and Lucini filed suit against Mr. Grappolini and his company (defendants) for breach of fiduciary duty.

ISSUE: Did Mr. Grappolini breach his fiduciary duty?

DECISION: As agents, Defendants owed Lucini general duties of good faith, loyalty, and trust.

In addition, Defendants owed Lucini “full disclosure of all relevant facts relating to the transaction or affecting the subject matter of the agency”.

Defendants were Lucini's agents and owed Lucini a fiduciary duty to advance Lucini's interests, not their own. When Defendants obtained an exclusive supply agreement with Vegetal for the Grappolini Company instead of for Lucini, they were disloyal and breached their fiduciary duties.

Lucini suffered substantial damages as a result of this breach.

As a proximate result of Defendants' breach of their fiduciary duties, Lucini suffered lost profit damages of at least $4.17 million from selling its grocery line of LEO products from 2000 through 2003. The Court will award Lucini its lost profits of $4,170,000, together with its $800,000 of development costs for LEO project. Defendants engaged in willful and malicious misappropriation as evidenced by their use of the information for directly competitive purposes and their efforts to hide the misappropriation and, accordingly, the Court will award $1,000,000 in exemplary damages. Such an award is necessary to discourage Defendants from engaging in such conduct in the future.