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Allegheny Coupling Co. v. H&H Metal Specialty

September 23, 2007

ALLEGHENY COUPLING CO. AND ALLEGHENY VALVE CO., PLAINTIFFS,
v.
H&H METAL SPECIALTY, INC., DEFENDANT.



The opinion of the court was delivered by: William M. Skretny United States District Judge

DECISION AND ORDER

I. INTRODUCTION

Plaintiffs in this action are Pennsylvania companies Allegheny Coupling and Allegheny Valve (collectively "Allegheny"). They develop and sell couplings and other products used to transfer liquids, including petroleum. Defendant H&H Metal Specialty, Inc. ("H&H") is a tool and die shop in New York that has manufactured Allegheny's products for more than 50 years. In 2004, Allegheny sought to end its relationship with H&H, which led to litigation. The parties settled their differences and entered into a formal settlement agreement ("the Agreement").*fn1 Now before this Court are the parties' competing claims that the other has breached the Agreement.

On December 14, 2006, H&H filed a Motion for Partial Summary Judgment on its first counterclaim, which seeks $244,000 plus interest for Allegheny's failure to pay for inventory. Allegheny filed a Cross Motion for Partial Summary Judgment on liability for H&H's alleged breaches of the Agreement.*fn2 After full briefing, this Court heard oral argument on February 26, 2007, and reserved decision at that time.*fn3 For the reasons that follow, the motions are denied.

II. FACTS

A. The Agreement

The Agreement was executed on February 16, 2006. It generally requires H&H to return inventory and equipment to Allegheny in exchange for certain payments and debt forgiveness. Raymond Heelan, president of Allegheny, and Paul Harris, Jr., president of H&H, executed the Agreement.

1. Transfer of Property

H&H agreed to relinquish and return Allegheny's property and equipment, including certain dies, jigs, presses, manufacturing equipment, machinery, fixtures, stamps, tools, accessories, intellectual property, and drawings. (Agreement, ¶ 1.) The parties defined Allegheny's property as those items listed in Exhibit A of the Agreement, and agreed that Allegheny's dies included all of those listed in Exhibit B. (Agreement, ¶ 1.) Allegheny agreed that it would take all reasonable and necessary steps to remove its property in a manner that would not interfere with H&H's continuing business. (Agreement, ¶ 1.) Allegheny also agreed to transfer ownership of certain of its equipment to H&H. (Agreement, ¶ 1.)

H&H agreed to allow Allegheny to inspect the property in its possession and to remove all dies that H&H would not be using to finish manufacturing current Allegheny products. (Agreement, ¶ 2.) Allegheny agreed that it would take receipt of its property from H&H in an "as is" condition as of February 2, 2006. (Agreement, ¶ 2.) H&H also agreed not to modify, alter, or tamper with Allegheny's property, and further agreed to take all reasonable and necessary steps to prevent any damage to the property. (Agreement, ¶ 2.)

2. Inventory

H&H agreed to use its existing usable inventory of approximately $200,000 -- $300,000 worth of Allegheny products to fill Allegheny's orders, and further agreed not to increase its inventory after February 2, 2006. (Agreement, ¶ 4.) Other than under circumstances specifically defined in the Agreement, H&H also agreed to stop selling or transferring Allegheny's products to Betts Industries, Inc. (Agreement, ¶ 4.) The parties agreed on a valuation schedule for the usable inventory, and Allegheny agreed to make 4 payments of $50,000 each at 30, 60, 90, and 120 days. (Agreement, ¶ 4.) Allegheny further agreed to pay for any excess inventory over $200,000 at 180 days. (Agreement, ¶ 4.) H&H agreed to box and ship the useable inventory pursuant to the customary standards between the parties (Agreement, ¶¶ 2, 4.)

3. Non-Compete and Consulting Agreements

H&H agreed to a separate non-compete agreement as part of the overall Agreement. (See Agreement, Exhibit C.) Specifically, H&H, Paul Harris, Bruce Harris, Thomas Harris, John Traniello, and Brian Ceci agreed not to compete with Allegheny for a 30-month period, with the exception of certain authorized sales to Betts Industries, Inc., as defined in the non-compete agreement. (Agreement, Exhibit C.) H&H also agreed that Allegheny could monitor compliance with the non-compete agreement through random, no-notice inspections of its entire premises during normal business hours. (Agreement, ¶ 5.) The parties agreed that the inspections could last no more than 1 hour and could occur no more than once per week during the 30-month period. (Agreement, ¶ 5.) Allegheny agreed that it would inspect the premises in a manner causing as little interruption of H&H's business operations as possible. (Agreement, ¶ 5.)

Further, Allegheny agreed to pay H&H a consulting fee of $150,000 in exchange for H&H providing it with a list of all of its vendors, the materials purchased from the vendors, and contact information for each vendor. (Agreement, ΒΆ 6.) The parties agreed that Allegheny would pay the ...


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