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Client Success

LEI Packaging: Egg on the Defendant's Face

July 9, 2018

LEI Packaging LLC (LEI) is a small, family run company that designs and manufactures sustainable molded pulp packaging egg cartons. In 2014, LEI engaged Canadian pulp molding machine maker Emery Silfurtun Inc. to design, build, and install a machine supposed to make 7,200 egg trays or cartons per hour for $4.5 million. Emery then contracted Samey ehf—an Icelandic engineering company—to provide project management and testing services sourcing, and electrical and automation parts. Emery also contracted with Hedinn hf to build the steel parts.

The machine's design and installation proved to be problematic, and months after the scheduled installation, the machine was far from fully operational: the machine was making defective cartons, malfunctioning, and required substantial employee monitoring to run for even brief periods of time. As a result, LEI was unable to produce the promised volume and even switched the machine to manufacture only egg flats—which are less profitable than cartons. Today, the machine is operational, but can only achieve 60-65% of the expected output.

In April 2015, LEI filed suit against Emery, Samey, and Hedinn alleging breach of contract and breach of implied warranties. The Maslon team, led by Bill Pentelovitch and including Sarah Horstmann and Peter Hennigan, represented LEI Packaging in the suit.

Although Emery agreed to arbitration, Samey and Hedinn fought the litigation for a year. After losing on its third motion to dismiss, Samey abruptly dropped out of the case and withdrew its counsel, and U.S. District Court Judge Ann Montgomery granted a default judgment against Samey. LEI moved for determination of damages and the District Court determined that Samey bore 70% of the responsibility for the damages that LEI had suffered due to Samey's "demonstrated failures as project manager, its abandonment of the project before the machine became operational and its failure to properly provide a functional robot system and electrical controls." LEI was pleased with the ruling, and the Maslon team looks forward to enforcing the judgment in Iceland.


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