A Beaumont company claims it was misled into selling its half of a partnership, causing it to lose out on substantial amounts of money.
Industrial Transportation Inc. filed a lawsuit Feb. 27 in Jefferson County District Court against Goldsmith & Eggleton, GEITI, Reliable Polymer Services, Michael Fagan and Ravago Holdings America.
In its complaint, Industrial Transportation, which trades rubber, alleges it agreed to help a company called Reliable Polymer Services by providing it with rubber at a discounted cost. In turn, RPS was able to sell the rubber for $6 million in profits, according to the complaint.
Industrial Transportation had agreed to the sale after a long history with the company. The relationship began in the mid 1990s when Industrial Transportation began to sell scrap rubber to Goldsmith & Eggleton for resale, the suit states.
Later, in 2004, Industrial Transportation and G&E began a profit sharing agreement. Under the terms of the contract, Industrial Transportation would sell rubber to G&E, who would then reprocess the material and share profits of the finished goods with Industrial Transportation, the complaint says.
Trust between the two companies began to grow, and they decided to form a partnership.
“The new partnership would leverage ITI’s existing relationships and supply contracts with various manufactures along the Gulf Coast, such as Goodyear and Laxness, to insure a steady stream of scrap rubber to the facility for reprocessing and G&E would leverage its reprocessing expertise and world-wide market research,” the suit states.
The partnership became known as Reliable Polymer Services, but did not prove as profitable as the companies had expected, the complaint says. To help with the financial strain, Industrial Transportation claims it provided the rubber at discounted prices from March 2008 through March 2012, allowing RPS to rein in profits of $6 million.
In addition to ITI and G&E, a corporation called GEITI owned a small portion of RPS, according to the complaint.
Repeatedly, GEITI and its president, Michael Fagan, attempted to lure Industrial Transportation into selling its 49.5 percent share of RPS. In March 2011, GEITI offered to buy all of Industrial Transportation’s ownership interest in the company, the suit states.
Although Industrial Transportation rejected the initial offer, it accepted a second offer in which Fagan promised to buy Industrials Transportation’s ownership interest and release it of all of its debt obligations, the complaint says.
Shortly thereafter, Ravago sold RPS and G&E to Ravago Holdings America.
“It is now clear that prior to the March 2012 sale of ITI’s ownership interest in RPS and GEITI to G&E, defendants were in secret negotiations to sell G&E and RPS to Ravago, thereby allowing Ravago to capitalize on ITI’s relationships and supply agreements with various manufacturers along the Gulf Coast,” the suit states. “None of the defendants informed plaintiff or its owners about the negotiations to sell G&E and RPS to Ravago, despite such information being a critical factor in ITI’s decision to accept Mr. Fagan’s second offer.”
Industrial Technology alleges breach of fiduciary duty, breach of good faith and fair dealing, breach of duty of loyalty, breach of contract, misrepresentation, fraud and conspiracy against the defendants.
It seeks actual, punitive and exemplary damages, plus attorney’s fees, costs, pre- and post-judgment interest and other relief the court deems just.
Matthew Matheny and Michael A. Havard of Provost Umphrey Law Firm in Beaumont will be representing it.
Judge Milton Shuffield, 136th District Court, has been assigned to the case.
Case No. D194-017