The state Supreme Court has reversed portions of a lower court decision that originally found a former Lydall Inc. executive liable for penalties in a lawsuit filed against him by the company, claiming that he had used confidential information to attempt a takeover of the company.
According to a ruling last week, the Supreme Court agreed with Lydall that former Chief Financial Officer Walter A. Ruschmeyer had violated the Connecticut Uniform Trade Secrets Act by divulging insider information in the takeover effort.
But the high court struck down the portion of the lower court ruling that had found that Ruschmeyer had acted “willfully and maliciously,” and therefore reversed the lower court’s finding that Lydall was entitled to reimbursement of its legal fees and compensatory damages.
In addition, the Supreme Court ruled that the lower court also erred when it enjoined Ruschmeyer from taking further legal action against Lydall in Delaware, where the company is incorporated.
A Lydall official could not be reached for immediate comment.
But in the company’s annual report, filed with the Securities and Exchange Commission in March, Lydall officials said it is unclear how the outcome of the case might affect the company’s finances.
“At this time, the company cannot determine the outcome of the appeal,” the filing states. “The final resolution of this matter may have a material impact on the future results of operations and cash flows of the company.”
Hostile Actions
The case stretches back to July 2003, when Lydall filed a lawsuit against Ruschmeyer in Hartford Superior Court accusing him of improper use of confidential company information in order to convince outside investors to help his efforts to effect a hostile takeover of the company.
Ruschmeyer’s lawyers claimed that their client merely was fulfilling his fiduciary duty by acting in the interest of the shareholders by developing a strategy to take the company private.
In November 2004 the Superior Court found in favor of Lydall, and held an additional hearing at which it found Ruschmeyer to be liable to the company for “actual damages, punitive damages, and payment of the company’s attorney fees.”
Monday’s Supreme Court ruling reversed the latter part of that lower court’s finding, leaving the company liable for its own court costs, which had cost the company more than $1.2 million as of the last SEC disclosure of the matter’s financial burden.
The company in 2006 also eliminated the position of chief operating officer. That action came during a major reshuffling of executives since the company announced in August 2005 that Chief Operating Officer Christopher R. Skomorowski was leaving.
