A Henrico businessman and his company each filed for bankruptcy this week amid a two-year legal battle with a competitor and after being sued by one of Richmond’s biggest law firms.
True North Products and its managing director, Brian Failon, have been battling Illinois-based Compass Chemical International in Georgia courts since 2009. Among other things, Compass alleges that Failon misused trade secrets.
With the case dragging on and in the face of hundreds of thousands of dollars in legal fees and millions in potential damages to Compass, True North, along with affiliate Source 1 Specialty Chemicals, filed for Chapter 11 bankruptcy protection. Failon simultaneously filed Chapter 7.
The filings will block the suit from moving forward for now, sparing True North and Failon from further damages from the case, which included $123,000 they must pay Compass’s attorneys after the court found that Failon destroyed evidence during the trial by erasing computer hard drives.
Declaring bankruptcy might also keep True North’s legal counsel at bay. LeClairRyan sued True North last week in Henrico County Circuit Court for $203,000 in unpaid legal expenses related to the Compass suit.
LeClairRyan is listed among the creditors in Failon and True North’s filings. Among its debts, True North lists $2 million owed to Compass, related to damages the company could potentially have to pay depending on the outcome of the lawsuit. It also owes more than $77,000 to the Atlanta-based law firm that is representing Compass.
It’s not clear whether the lawsuit and related costs forced Failon and True North into bankruptcy or whether the bankruptcy was filed with the specific goal of halting the lawsuit.
Roy Terry, an attorney with DurretteCrump who is representing True North and Failon in their bankruptcies, was not available for comment.
Compass, which sells water treatment chemicals, filed the suit against Failon and True North in 2009 after Failon allegedly started a competing business three days after leaving the company.
When he left, the suit alleges, Failon took with him some of the company’s trade secrets and solicited its customers to do business with him. Compass claims Failon violated his employment agreement in a number of ways, including by violating nondisclosure provisions.
Compass sued True North and Failon for breach of contract, breach of fiduciary duty and misappropriation of trade secrets and asked for damages and an injunction to prevent True North from continuing to benefit from the alleged actions.
Lawrence Burnat, an Atlanta attorney with Schreeder, Wheeler & Flint who is representing Compass, said the bankruptcies would put a stop to the lawsuits, for now.
“Any further proceedings will depend on the rulings of the bankruptcy court,” Burnat said.
Michael Schwartz is a BizSense reporter. Please send news tips to [email protected].
A Henrico businessman and his company each filed for bankruptcy this week amid a two-year legal battle with a competitor and after being sued by one of Richmond’s biggest law firms.
True North Products and its managing director, Brian Failon, have been battling Illinois-based Compass Chemical International in Georgia courts since 2009. Among other things, Compass alleges that Failon misused trade secrets.
With the case dragging on and in the face of hundreds of thousands of dollars in legal fees and millions in potential damages to Compass, True North, along with affiliate Source 1 Specialty Chemicals, filed for Chapter 11 bankruptcy protection. Failon simultaneously filed Chapter 7.
The filings will block the suit from moving forward for now, sparing True North and Failon from further damages from the case, which included $123,000 they must pay Compass’s attorneys after the court found that Failon destroyed evidence during the trial by erasing computer hard drives.
Declaring bankruptcy might also keep True North’s legal counsel at bay. LeClairRyan sued True North last week in Henrico County Circuit Court for $203,000 in unpaid legal expenses related to the Compass suit.
LeClairRyan is listed among the creditors in Failon and True North’s filings. Among its debts, True North lists $2 million owed to Compass, related to damages the company could potentially have to pay depending on the outcome of the lawsuit. It also owes more than $77,000 to the Atlanta-based law firm that is representing Compass.
It’s not clear whether the lawsuit and related costs forced Failon and True North into bankruptcy or whether the bankruptcy was filed with the specific goal of halting the lawsuit.
Roy Terry, an attorney with DurretteCrump who is representing True North and Failon in their bankruptcies, was not available for comment.
Compass, which sells water treatment chemicals, filed the suit against Failon and True North in 2009 after Failon allegedly started a competing business three days after leaving the company.
When he left, the suit alleges, Failon took with him some of the company’s trade secrets and solicited its customers to do business with him. Compass claims Failon violated his employment agreement in a number of ways, including by violating nondisclosure provisions.
Compass sued True North and Failon for breach of contract, breach of fiduciary duty and misappropriation of trade secrets and asked for damages and an injunction to prevent True North from continuing to benefit from the alleged actions.
Lawrence Burnat, an Atlanta attorney with Schreeder, Wheeler & Flint who is representing Compass, said the bankruptcies would put a stop to the lawsuits, for now.
“Any further proceedings will depend on the rulings of the bankruptcy court,” Burnat said.
Michael Schwartz is a BizSense reporter. Please send news tips to [email protected].