SOLO PRACTITIONER SUCCESSFULLY BATTLES DEFENSE TEAM'S TACTICS

Law Reporter, Dec 2004 by Davenport, Courtney L

American Foods Co. v. Beimark, Inc., Mich., Macomb County Cir. Ct., No. 03-836-CK, Sept. 2004.

A commercial litigation case generally does not have the kind of drama anticipated in criminal trials or tragic personal injury cases. That is why John M. Perrin, a solo practitioner from St. Clair Shores, Michigan, was surprised when he found himself battling a team of defense attorneys who sent mounds of discovery requests and secretly gained unsupervised access to his client's files, which were subsequently destroyed by a fire at the copying facility. Suddenly, Perrin found himself cast in die role of David against a corporate firm Goliath.

American Foods is a family-owned beef jerky producer started in 1979 by a father and his sons. Over the years, it grew to be a national distribution chain with sales over $6 million in 1999. That year, when a sales representative approached the company, it formed a contract with Belmark, a large, national packaging producer with sales of almost $60 million. Belmark agreed to make printed flexographic packaging, which American Foods would then tightly seal over its product. American Foods placed the first order in September, to be delivered within three weeks, so the beef jerky could be in stores in time for the holidays. However, Belmark did not ship the order until January, after die holiday season was over.

Upon receiving the late order, American Foods discovered the print was often too light to read. When the print was dark enough, the packaging was difficult to use because it had too much solvent trapped between the layers of plastic, and the heat used to vacuum seal the packaging caused it to delaminate, or open, within about 48 hours. Because American Foods did not discover the defect until it had sent thousands of packages to stores, what was shipped began spoiling on the shelves after the packages opened.

Belmark assured American Foods it would fix the problems, but the defective packages continued to come. American Foods was forced to return at least 1.2 million of the 6 million packages for poor print quality, which Belmark then attempted to reprint without success. During this time, American Foods was losing business because it could not fill its orders on time, and those filled were rotting on the shelves. American Foods's sales dropped by half to $3 million and have remained at that level.

Belmark blamed American Foods for the problems, saying the company was being too picky about the package appearance. Its sales representative, however, told American Foods it should find a new packager because Belmark knew it was "in over its head," but refused to fix the problems. He then quit his job.

American Foods brought in Perrin as sole counsel and filed suit against Belmark, alleging breach of express and implied warranties. American Foods asked for lost profits, a claim Perrin says is complicated and often overlooked.

"It is a major undertaking at great expense to recreate the fact patterns and establish causation in a lost profits case," he explained. "Nonetheless, the damages may be there, and the situation may justify the workup, as my case did."

Belmark countersued, claiming it was entitled to reimbursement for the costs of the unsuccessful reprints. But Perrin's battle was just beginning. After a mediator valued his client's case at $3 million, Belmark augmented its insurer's in-house defense counsel with a squad of lawyers who refused to produce experts, sent copious pleadings, and requested access to American Foods's financial records. When its forensic accounting expert and a paralegal came to Perrin's client to get 45 boxes of documents to take to a copier, they were caught trying to take three additional boxes from an unrelated case. The 45 boxes were transferred to a copy facility, but defense counsel then asked Perrin for permission to transfer them to a cheaper facility, and he agreed.

Perrin later learned the first copy facility had refused to give the opposing counsel access to the files without his consent, but the second facility had much more lax rules. It allowed his opponents to spend five days going through the records, which they used to select certain documents for reproduction.

"The request to move the records to a cheaper facility was nothing more than a pretext for gaining access without my knowledge," Perrin said, adding that he would never agree to such a request again.

Unfortunately, the second copy facility suffered a fire that damaged all the boxes. None of the documents were salvageable. After learning of defense counsels' unauthorized access to the documents, Perrin filed a motion for default for spoliation. The defense then argued it had the right to present the surreptitiously obtained copies as evidence. Although the court recognized defense counsels' actions were unethical and instructed Perrin to file a grievance with the state bar against the lead attorney, it denied Perrin's motion and held neither side could present any of the documents because there was a lack of a chain of custody.