Panel remands ongoing battle between bakeries; Mama Gramm's claims rival set up sham corporation to steal recipes

By Jonathan Bilyk | Apr 15, 2014

After failing twice before, the owners of a suburban Cook County bakery have won yet another opportunity on appeal to try to persuade a Cook County judge to award them damages from the man they allege set up a sham corporation to steal their recipes and customers for his own bakery.

On April 10, a panel of the First District Appellate Court ruled in favor of plaintiff John Buckley, listed as one of the owners of Mama Gramm’s Bakery in Country Club Hills, allowing him to continue in his action against businessman Haitham Abuzir, who is also known as Mike Abuzir.

The ruling, which the appellate justices called a “close call,” overturned the January 2013 decision of Cook County Circuit Judge LeRoy K. Martin Jr. that granted Abuzir’s motion to dismiss the suit.

The panel's opinion was delivered by Justice James R. Epstein, with justices Terrence J. Lavin and Nathaniel R. Howse Jr. concurring.

The case centers on the action Buckley and his business entity, Mama Gramm Bakery Inc., brought in June 2010.

In that complaint, Buckley asked a judge to “pierce the corporate veil” of Palos Heights-based Silver Fox Pastries Inc., a rival business, and hold Abuzir personally liable for damages Silver Fox had been ordered to pay Buckley and Mama Gramm’s.

Years earlier, Mama Gramm and Buckley had triumphed in a suit against Silver Fox in which they alleged their rival had improperly hired Mama Gramm’s chief baker solely for the purpose of obtaining proprietary recipes and other trade secrets to undercut their business and begin selling the same products.

The judge in that suit ordered Silver Fox to pay Mama Gramm about $421,000 in damages.

Mama Gramm, however, was unable to collect the damages from Silver Fox, which according to state records dissolved as a corporation in 2007.

In an attempt to collect those damages, Buckley brought suit against Abuzir. Buckley alleged Abuzir, while not listed as an officer or shareholder of Silver Fox, was actually the person who controlled and ran the company, which was officially owned by his sister and brother-in-law.

Abuzir countered by asking the judge to dismiss the suit, which he said was improper because he was not an officer or shareholder in Silver Fox.

The trial judge agreed and dismissed the case in December 2010.

Buckley won a motion to reconsider, and filed an amended complaint in April 2011. Abuzir responded with another motion to dismiss, arguing that his role in helping his relatives finance the business and provide various support services to Silver Fox was still not enough to justify piercing the corporate veil.

The trial judge again dismissed the case, spurring Buckley to appeal. An appeals panel reversed the dismissal, and remanded it to the circuit court for further proceedings.

Abuzir in September 2012 again moved to dismiss, and the judge again granted his request in January 2013, prompting yet another appeal from Buckley.

In reversing the trial court, the First District in its recently-handed down opinion determined Abuzir’s contention that he is exempt from veil-piercing may not hold up under Illinois law and precedent.

The justices noted questions concerning whether the corporate veil can be pierced to determine the precise management role of individuals who are not shareholders or officers in a corporation, but said precedent does not expressly forbid veil-piercing in this instance, just because Abuzir was not officially listed as an officer or a shareholder.

“There are many ways to organize a sham corporation,” Epstein wrote for the panel. “In some instances, the wrongdoer neither holds stock nor serves in an official capacity.

He added, “Making officer, director or shareholder status a prerequisite to veil-piercing elevates form over substance and is therefore contrary to veil-piercing’s equitable nature.”

The panel further determined that Buckley had raised allegations sufficiently strong enough to allow him to continue with his arguments that Abuzir had established Silver Fox through his family members to “perpetrate an injustice” against Mama Gramm’s.

"This area of law is still developing, and given the lean factual pleadings in the complaint, we see this as a close case, and our disagreement with the able and experienced trial judge is tempered with great respect for his careful consideration of this issue," Epstein wrote.

The justices stressed that their decision contained “no opinion as to the ultimate issue of whether the corporate veil should be pierced," but found the trial court had erred in not allowing Buckley to continue with his attempts to prove that it should.

Epstein explained that the panel's analysis over the corporate veil claim would have been much easier had the plaintiffs "explained precisely how defendant used Silver Fox to violate the Illinois Trade Secrets Act or otherwise engaged in fraud or deception."

Regardless, he wrote, the plaintiffs' amended complaint was sufficient to survive dismissal and as such, remanded the matter back to the trial court yet again for further proceedings. He further noted that the question over whether the corporate veil should be pierced " will be determined after evidence has been submitted."

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