An ongoing legal dispute pits Chicago’s Gonnella Baking Company against a former employee and his wife’s packaging company, which Gonnella alleges in a new lawsuit is “a sham company formed for the explicit purpose of defrauding Gonnella.”
Jeff Hicks was a buyer for Gonnella. In that role, he sourced things like boxes, bags, plastic film and delivery pallets from Sabre Supply, owned by his wife, Beata Hicks. In January 2022, Sabre filed a breach of contract and unjust enrichment lawsuit against Gonnella in Cook County Circuit Court, alleging the bakery had almost $300,000 in past due invoices.
Gonnella, which before the lawsuit had notified Sabre regarding concerns about inflated pricing, filed a counterclaim against Sabre and the Hickses, alleging Jeff Hicks didn’t tell Gonnella his wife owned Sabre and expressing belief Sabre had always been overcharging.
In a Dec. 5 opinion, Cook County District Judge Patrick Sherlock agreed with Sabre’s argument that Gonnella’s affirmative defense response to its lawsuit violated state legal code by introducing facts not found in its complaint. Sherlock said Gonnella could not plead illegality, because its allegations regarding Sabre’s conduct were conclusory, and explained the bakery couldn’t raise prior breach of contract as an affirmative defense.
Sherlock did allow a portion of Gonnella's claim to survive, writing Gonnella provided adequate allegations of conduct or actions on the part of Sabre and the Hickses “were concealed, and but for the concealment, it would have led (Gonnella) to take other actions.” He also said Gonnella was allowed to invoke the doctrine of unclean hands, which prevents someone from taking legal advantage of their own misdeed.
However, Sherlock said a counterclaim Gonnella filed against Beata and Jeff Hicks was “procedurally improper,” explaining the couple was not party to Sabre’s lawsuit seeking a court to force Gonnella to pay past-due invoices.
“Gonnella does not seek indemnity or contribution for its potential liability to Sabre," Sherlock wrote. :The only avenue for Gonnella is to file a separate lawsuit.”
The company did just that with a complaint filed Jan. 17. In that filing, the bakery identified Hicks as “a member of the families that have owned and operated Gonnella for many years” and said he indirectly or directly owns corporate stock. It further alleged that when Hicks placed Gonnella’s first orders from Sabre in 2020, a few months after his wife founded the company, Sabre ordered the products from other suppliers and had them drop-shipped to Gonnalla at a markup.
“At times, Hicks was placing orders for the same products during the same time period from both other suppliers and Sabre, even though the other suppliers’ prices were better than Sabre’s prices,” Gonnella asserted in its lawsuit. “In 2020, the first year Sabre apparently did business of any kind, Hicks caused Gonnella to order over $700,000 of products from Sabre.”
Gonnella’s complaints compared the prices it paid Sabre for products in 2020 to similar items from other vendors, such as hairnets at $68.75 to $124.50 from Sabre that sold for $48.65 from a different source, or earplugs that might’ve cost up to $136.07 but instead cost $295.
Gonnella alleged it remained unaware of Beata Hicks’ ownership of Sabre well into 2021, and accused Jeff Hicks of bypassing compliance protocols to keep ordering from his wife’s company and failing to adequately audit such purchases. Gonnella said an inventory manager learned Beata Hicks owned Sabre when calling the company regarding pallets in the second half of 2021.
But in a motion filed Sept. 16, 2022, seeking to dismiss Gonnella's original counterclaim, the Hickses said Gonnella was aware and continued to submit purchase orders. They cited a Nov. 5, 2021, meeting during which the Gonnella Board of Directors allegedly acknowledged Beata Hicks’ role in her business.
In its January filing, Gonnella acknowledged submitting the Nov. 9, 2021, order, but said it had yet to discover “nearly all other material facts related to the scheme.”
Gonnella further said it had to honor the orders with Sabre because they incorporated a customer’s private label that only Sabre could deliver within the timeframe the bakery had already promised. It placed no orders with Sabre after November 2021 and ultimately concluded it paid at least $630,272 in inflated prices compared to buying the same products from other suppliers.
“Because Beata lacked the knowledge or experience that would have been needed to operate Sabre,” Gonnella alleged, Jeff “Hicks was assisting Sabre’s operations while employed by Gonnella, including while working from home during the COVID-19 pandemic.”
Gonnella further alleged Sabre never acted as a proper stocking distributor of industrial goods, despite presenting itself as such, and said the company’s “assets or funds were intermingled with personal assets, such as through the use of Beata Hicks’ personal telephone number as Sabre’s corporate phone” and argued the court should not treat Sabre as a distinct corporate entity.
The Jan. 17 filing includes formal complaints of breach of fiduciary duty against Jeff Hicks, aiding and abetting that breach against Beata Hicks and Sabre, fraud and fraudulent concealment against Jeff Hicks, civil conspiracy against the couple and the company and violation of the Consumer Fraud and Deceptive Business Practices Act against Beata Hicks and Sabre.
Representing Gonnella in the matter is the Chicago firm Nisen & Elliott.
Jeff Hicks is represented by Meltzer, Purtill & Stelle, of Chicago. Sabre and Beata Hicks are represented by Markoff Law, also of Chicago.