March 11, 2009
ICE Corporation, Plaintiff vs. Hamilton Sundstrand Corporation and Ratier-Figeac, S.A.S., Defendants
Case No. 05-4135 United States District Court for the District of Kansas
The case was filed by ICE Corp. in November, 2005 and the verdict was Monday, March 9, 2009. The jury found liability and awarded slightly less than $5 million in actual damages (largely against Ratier-Figeac), $2.5 million in exemplary damages against Hamilton Sundstrand for intentional misappropriation of trade secrets, and $10 million in exemplary damages against Ratier-Figeac for intentional misappropriation of trade secrets. The 2 defendants are Hamilton Sundstrand and Ratier-Figeac, which are, respectively, American and French subsidiaries of United Technologies (No. 49 of the Fortune 500).
Plaintiff, a small company of approximately 45 employees, is ICE Corporation, located in Manhattan, Kansas. ICE Corp. specializes in the design and manufacture of aircraft deicing systems. ICE had nearly 30 years of experience designing and manufacturing deicing systems and other electronic components for aircraft. ICE had been a preferred supplier to Hamilton Sundstrand for 22 years, before these events. In fact, ICE has been the supplier to Hamilton Sundstrand of deicing equipment for two other Airbus propeller-driven airlifters, the CASA C-295 and the C-235.
In November, 2004, ICE was awarded the contract to design and manufacture the propeller deicing system for a new Airbus Military airlifter, the A400M. After completing the revised design, ICE was terminated allegedly for cost reasons relating to changed specifications imposed by Airbus and the Defendants. The jury found the termination of ICE was wrongful and in violation of the duty of good faith and fair dealing which is part of every contract. Defendants' own witnesses admitted or their own documents established: (1) ICE was directed by Defendant Hamilton Sundstrand on behalf of Defendant Ratier-Figeac to complete the design of the propeller deicing system in accordance with revised specifications; (2) ICE had completed its revised design before its termination; (3) ICE was ahead of schedule and had already constructed the PCBs (printed circuit boards) for the primary unit, called the static control unit; (4) Defendants admitted ICE's design worked and was compliant with the revised specifications. Moreover, Defendants admitted there was no criticism of ICE's work on the project.
Instead, Defendants claimed the termination which occurred on or after June 15, 2005, allegedly because ICE's pricing changes necessitated by the changed specs were claimed to be "too high." As to this alleged commercial justification, Defendants' own witnesses admitted under cross-examination, or their own documents established:
ICE's contract and its quotations were in dollars, by agreement. Instead of using the prevailing conversion rates, Defendant Ratier compared ICE's prices to its French competitor using a Dollar to Euro conversion rate established four years earlier, in 2001. The 2005 Dollar to Euro exchange rates averaged 1 euro to 1.25 dollars, and if used, heavily favored American exports rather than European suppliers. Instead, the outdated exchange rate was used by Ratier, which Hamilton's witness admitted overstated ICE's prices in comparison to the European competitor.
Using the prevailing exchange rate, one of the Defendants' witnesses admitted ICE offered a price (7147 euros) on April 8, 2005 for a deicing system that fully met the revised specs. This 7147 euro price was less than the price given to the replacement French supplier (7200 euros) 6 months later. Despite increasingly demanding specifications, Ratier-Figeac dropped by 20% the price, from $8800 to $7000, it claimed it was willing to pay, which ICE alleged demonstrated its intent to force ICE off the project. On cross-examination, the project leader for Artus, the replacement supplier, admitted the $7,000 unit price could not be done by his company - that is, Ratier was demanding a commercially unreasonable price in order to force ICE off the project.
ICE also had a huge experience advantage, with 30 years designing deicing systems and more than a year designing the system for this specific aircraft. Conversely, Artus, the replacement French supplier only had one prior experience in designing a deicing controller for an aircraft and had done no work on the deicing system for the A400M aircraft.
In addition, memoranda were discovered which indicated immediately before it was awarded the deicing contract, Artus was performing poorly on another project on the A400M for Ratier and was performing poorly in understanding the deicing system. One Ratier employee criticized Artus work on a separate A400M project 2 weeks before Artus was selected for the deicing system, "I think we should just come out and ask them why they are being so unprofessional." Immediately after its selection and two months before the Artus contract was signed, Ratier witness wrote an e-mail harshly criticizing Artus' understanding of the requirements of the deicing system. The e-mail was important because it confirmed the lack of experience by Artus, and also because Artus was subject to cancellation at any time and Ratier could have returned the contract to ICE (with its already completed design).
Although Defendants all denied any subsequent change in price to Artus - such an admission would have doubled actual damages and exposed them to potential sanctions - the Artus contract price - 7200 euros (not dollars), was subject to a Design to Cost clause entitling Artus to renegotiation of price if the costs resulting from Airbus specifications resulted in a 15% increase in unit price. Tens of thousands of documents in French were produced, and only certain ones were translated by ICE's counsel, but they inadvertently discovered in several French-language documents on May 22, 2007, Artus advised Ratier that its actual price "in accordance with industrial reality" was 13,500 euros rather than 7,200 euros. Thus, after just 17 months, Artus advised it wanted $18,176, twice the amount ICE was willing to make the unit for.
Moreover, the jury found in their verdict that the Defendants unlawfully misappropriated key components of ICE's design and gave them to the French replacement company, Artus. The jury awarded approximately $5 million in lost profits and other damages, and found the misappropriation was intentional, and awarded $2.5 million in exemplary damages against Hamilton Sundstrand and $10 million against Ratier-Figeac.