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Harleman Manufacturing, LLC v. Pengo Corp.

United States District Court, W.D. Missouri, Southern Division

August 30, 2016

HARLEMAN MANUFACTURING, LLC, Plaintiff -Counterdefendant,
PENGO CORP., Defendant-Counterplaintiff and DANA SCUDDER, Defendant.



         Before the Court is Defendant-Counter Plaintiff Pengo Corporation and Defendant Dana Scudder's Motion for Summary Judgment. (Doc. 85). For the reasons stated herein, the Court DENIES Defendant-Counter Plaintiff Pengo Corporation and Defendant Dana Scudder's motion. Plaintiff Harleman Manufacturing, LLC., has brought its cause of action against Pengo Corporation and Dana Scudder, alleging Breach of Contract (Count I); Specific Performance of the Contract (Count II); Negligent Misrepresentation (Count III); Fraudulent Misrepresentation (Count IV); Tortious Interference with a Lawful Business (Count V); Conversion (Count VI); Prima Facie Tort (Count VII); Trade Secret Misappropriation (Count VIII); Negligence (Count IX); and Promissory Estoppel (Count X). The multiple claims brought by Harleman arise out of the terms of alleged promises and agreements between Harleman and Pengo; including Pengo's alleged agreement to produce sample and production cast auger heads to Harleman; Pengo's alleged agreement to purchase augers from Harleman; and the alleged mishandling of confidential information provided by Harleman to Pengo in order to work on the sample and cast production of augers.


         Harleman manufactures rock augers, which are a drilling tool, along with other tools and machinery. Harleman developed and patented a specific design of rock auger and sold those to its customers. At some point in time Harleman began looking to have its rock heads casted by a third party. Pengo, through its employee Dana Scudder, approached Harleman about its rock augers. One of the discussions between Harleman and Scudder involved Pengo creating sample augers and cast production augers for Harleman and specifically creating the two-dimensional drawings and three-dimensional models for Harleman. The drawings and models are then used to produce the tooling and casted auger heads.[1] Eventually the parties agreed to work together on the production and sale of Harleman's augers, however, the terms of that agreement are disputed and have led to the current lawsuit. One of the main disagreements is Harleman's contention that as part of its decision to work with Pengo on the production of casted auger heads, Pengo promised to purchase 2, 500 to 3, 500 augers per year from Harleman. Pengo denies the existence of an agreement to purchase augers, and further states it never promised nor agreed to purchase augers from Harleman.

         The terms of the agreement were initially negotiated between Dana Scudder, the Vice President, Sales and Marketing, at Pengo and Ron Harleman, the owner of Harleman. The parties dispute the substance of the discussions between Scudder and Harleman. Harleman states there were multiple discussions with Scudder regarding promises made by Pengo and that those discussions are reflected, in part, by email correspondence and deposition testimony submitted in opposition to summary judgment. Defendants argue there were only “preliminary discussions” between the parties and that no promises were made, nor agreements reached, to purchase augers from Harleman.

         There are two “agreements” that were reduced to writing and executed by the parties. The first document, executed on January 8, 2010, is entitled “Mutual Confidential Disclosure Agreement.” The parties agreed that certain information that is non-public and confidential in nature would be exchanged and was prohibited from disclosure. The confidentiality agreement further states:

Recipient agrees to receive Confidential Information from the Disclosing Party during the term of this Agreement and to hold in confidence such Confidential Information, expect information that: (a) at the time of disclosure is in the public domain; (b) after disclosure, becomes part of the public domain by publication or otherwise, through no act of Recipient nor any agent or employee of Recipient; (c) Recipient can establish by competent proof was in its possession at the time of disclosure to Recipient and was not acquired, directly or indirectly, from the Disclosing Party; or ….

         The second document, dated May 4, 2010, is entitled, “Commitment Form.” The parties dispute the terms and meaning of the commitment form. Pengo argues the commitment form was a “contract to produce sample auger heads and a price quote for production auger heads.” It further argues, it did not require Pengo to manufacture or Harleman to purchase any quantity of production auger heads, and even if it did, Harleman waived any breach of agreement by continuing with the project. Harleman argues the commitment form was entered into based on discussions, promises and agreements between the parties, arguing some terms or promises upon which it was based do not appear in the document. For example, Harleman contends at least one other agreement was supposed to be executed by the parties, but Pengo failed to deliver on those promises or agreements despite Harleman's demands for their agreements to be reduced to writing.

         The Commitment Form states, in part, the following: Harleman will pay for all tooling costs and maintenance costs. Then it states “pricing is listed below:…” The form then has a chart setting forth part nos., EAUs, descriptions and tooling costs. The “Form” then states:

Samples (3 to 5 of each) to be provided in July 2010.
Contract will run throughout the life of the patent. (Patent #7357200B2)
Terms are 1% -10. Net 30 days.
FOB Laurens, IA 50554 Either party can cancel this agreement with 180 days written notice.
Upon cancellation of said agreement, Harleman Mfg, LLC agrees to take all inventory on order, in Laurens, in transit, or in production relative to this agreement.
Pengo agrees to hold pricing for 12 months from dated & signed agreement.
Pengo agrees to negotiate future price increases annually, based on GPI and export conversion rates

         Finally, the Form lists a chart of Cast Pricing, including part nos., EAUs, descriptions and cast pricing.

         In early 2010, Harleman sent Pengo samples of ten different augers for reverse engineering. Pengo then created three-dimensional models and two-dimensional drawings of those augers. Harleman contends in May 2010 it received two-dimensional drawings but no 3D drawings or models. Harleman requested changes be made to the drawings it received in May 2010. From the record, it appears the parties relationship began to deteriorate after this time.

         The parties have submitted numerous exhibits that establish disputes between the parties over the terms of their agreement.[2] For example, the parties disagree on what conversations took place with regard to the requested changes first made by Harleman in May 2010. The parties further dispute the requirements of the Commitment Form with regard to whether a purchase order was necessary for production of samples and the discussions between Pengo and its Chinese suppliers.[3] The parties dispute the process for sending the samples to China for production, the timing of production and what was actually provided pursuant to the agreement. The parties also dispute what information, if any, was confidential under their agreement.

         Based on the significant disagreements between the parties regarding Pengo's obligations pursuant to the parties' “agreements, ” and Harleman's clear dissatisfaction with the arrangements, the relationship ended when Pengo terminated the agreement in May 2011. Even the termination of the parties' relationship is disputed, as ...

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