Bunnett, Energy Feeds International Win Contempt Finding
In ongoing case, federal court holds defendants in contempt for secret cash payments
Schiff Hardin, a national law firm based in Chicago, IL, won a finding of civil contempt for clients Energy Feeds International LLC and Bunnett & Company Inc., two California-based animal nutrition businesses, both founded and owned by William Bunnett, in a lengthy opinion and order from the United States District Court for the Western District of Texas.
Following a bench trial last July, the court issued on March 6 its opinion finding in contempt the former general manager of Energy Feeds and Bunnett & Company, a second former sales agent, and the vice president of a former major customer. The opinion issued as a report and recommendation from Magistrate Judge Andrew W. Austin.
The contempt proceeding arose out a temporary injunction issued by the federal district court in Austin, TX, in 2016, after the former general manager resigned. That injunction barred the general manager from competing with both Bunnett businesses. The former general manager continued to compete with the Bunnetts, concealing his activities by claiming disability and declaring bankruptcy. The court found that in violation of the injunction, the former GM had accepted a series of cash payments from a competitor in Malaysia that were concealed with false invoices.
His co-defendants arranged for money to be wired from Malaysia and then distributed in a series of small payments to the former general manager’s friends and family in California. The misconduct came to light months later in discovery in related litigation which, coincidentally, also resulted in a contempt finding from a Texas state court in 2016 against another Bunnett adversary for violating another injunction. That criminal contempt was ultimately upheld following appeal to the Texas Court of Appeals and Texas Supreme Court.
The latest contempt order is part of several related proceedings in Texas, California, and Singapore all arising from a series of events that began with the former general manager’s resignation in 2015. In 2017, a Texas jury awarded the Bunnetts actual and punitive damages following a two-week trial against one of the suppliers who was found to have wrongly terminated a long term exclusive distribution agreement.
Separately, the former general manager filed for bankruptcy. Schiff Hardin, on the client’s behalf, won a dismissal of the bankruptcy case based on a finding of bad-faith filing following a bench trial.