1. Explain how Mr. Grappolini breached his fiduciary duty. 2. What lessons can y
ID: 434024 • Letter: 1
Question
1. Explain how Mr. Grappolini breached his fiduciary duty. 2. What lessons can you learn about contracts, suppliers, and product launches from the case? 3. Evaluate the ethics of Mr. Grappolini's conduct. Why did Vegetal's officers refer to Mr. Grappolini as a "bad boy"?
Referenece:
FACTS: Mr. Frigo hired Mr. Grappolini as a consultant for his Lucini company, a company that
developed high-end olive oils for sale in the United States. Mr. Grappolini was to negotiate a
supply contract with Vegetal for its olive oil, one that was necessary for use in creating a flavored
olive oil Frigo was developing (the LEO project).
With the LEO product launch approaching, and no copy of the alleged Vegetal supply contract
available, Mr. Frigo had Lucini’s lawyer in Italy contact Vegetal directly for a copy. The lawyer
learned that Vegetal had a supply contract, but the contract was with Mr. Grappolini’s company
and that it was not transferable to Lucini. Mr. Frigo then confronted the officers of Vegetal they
acknowledged that they had negotiated with Mr. Grappolini for his company, not for Lucini and
were not aware of Lucini’s needs or Mr. Grappolini’s representation of Lucini. The officers at
Vegetal said that Grappolini had been a “bad boy” in negotiating the contract for himself. Vegetal
agreed to supply Lucini with olive oil in the future, but could not deliver it in time for the launch
of Lucini’s new line. The soonest it could deliver would be after the next harvest, a time that
meant the marketing and sales plans of Lucini for its new product had been wasted.
Mr. Frigo and Lucini filed suit against Mr. Grappolini and his company (defendants) for breach of
fiduciary duty.
ISSUE: Did Mr. Grappolini breach his fiduciary duty?
DECISION: As agents, Defendants owed Lucini general duties of good faith, loyalty, and trust.
In addition, Defendants owed Lucini “full disclosure of all relevant facts relating to the transaction
or affecting the subject matter of the agency”.
Defendants were Lucini's agents and owed Lucini a fiduciary duty to advance Lucini's interests,
not their own. When Defendants obtained an exclusive supply agreement with Vegetal for the
Grappolini Company instead of for Lucini, they were disloyal and breached their fiduciary duties.
Lucini suffered substantial damages as a result of this breach.
As a proximate result of Defendants' breach of their fiduciary duties, Lucini suffered lost profit
damages of at least $4.17 million from selling its grocery line of LEO products from 2000 through
2003. The Court will award Lucini its lost profits of $4,170,000, together with its $800,000 of
development costs for LEO project. Defendants engaged in willful and malicious misappropriation
as evidenced by their use of the information for directly competitive purposes and their efforts to
hide the misappropriation and, accordingly, the Court will award $1,000,000 in exemplary
damages. Such an award is necessary to discourage Defendants from engaging in such conduct in
the future.
Explanation / Answer
1.Mr. Grappolini breached his fiduciary duty by doing his personal gain of contracting with the Vegetal for his company and not for Lucini company for which he was hired as a consultant and that he was assigned the task of fixing a supply contract for Lucini for its olive oil.
2.The lesson that can be learned is that one has to act in the capacity of fiduciary and maintain the trust and good faith. There has to be due diligence from the company side as well to oversee any task so that it shall not end harming the company. The launch of the product is seriously affected by the Grappolini act or breach of fiduciary relation. The suppliers simply followed their obligation under contract with grappolini and could not therefore provide the contract to lucini.
3.Mr. Grappolini ethically should not have done harm to the lucini when in fact he had given his commitment to Lucini that he would negotiate contract on behalf of Lucini and not his personal company.
4.Vegetal's officers referred to Mr. Grappolini as a "bad boy" because he played out well and ended up negotiating on his personal company behalf and gained himself and not Lucini.
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