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1 0 0 Daniel P. Collins (State Bar Id No. 000 Theodore P. Witthoft (State Bar Id No. 0 COLLINS, MAY, POTENZA, BARAN & GILLESPIE, P.C. 0 North Central Avenue, Suite 0 Phoenix, Arizona ( dcollins@cmpbglaw.com Attorneys for Northern Wisconsin Produce Company, Inc. NORTHERN WISCONSIN PRODUCE COMPANY, INC., a Wisconsin corporation, v. UNITED STATES DISTRICT COURT Plaintiff, STEVEN J. DELAPORTAS and JANE DOE DELAPORTAS, husband and wife; CHRISTOPHER VASILAS and JANE DOE VASILAS, husband and wife; and IONIAN FOODS L.L.C., an Arizona limited liability company, Defendants. STATE OF ARIZONA ss. County of Maricopa DISTRICT OF ARIZONA :0-cv-0-HRH AFFIDAVIT OF SUM CERTAIN Daniel P. Collins, being duly sworn upon oath, deposes and states as follows:. I am an attorney with the law firm Collins, May, Potenza, Baran & Gillespie, P.C. ( CMPBG, which has served as counsel for Plaintiff, Northern Wisconsin Produce Company, Inc. ( Northern Wisconsin, in this action. I am admitted to the practice of law in the state of Arizona. - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

2 0 0. Plaintiff s claims against Defendants Steven J. Delaportas ( Steven Delaportas or Mr. Delaportas and Joanne Delaportas aka Joanne Guggino ( Joanne Delaportas or Ms. Delaportas, and Ionian Foods, L.L.C., an Arizona limited liability company ( Ionian (collectively Defendants, are based upon Conversion, Tortious Interference with Contracts and Business Expectancies, Aiding and Abetting Breach of Fiduciary Duties, Unfair Competition, and Punitive Damages.. Northern Wisconsin was engaged in business transactions with Robert Michael Bertola ( Bertola and The Cheese Company, Inc. ( Cheese Co., an Arizona corporation, both before and after June, 000, when Cheese Co. filed a voluntary chapter bankruptcy petition in the U.S. Bankruptcy Court for the District of Arizona at case number :00-bk-- RJH (the Cheese Co. Bankruptcy.. Bertola was the chief executive officer and sole shareholder of Cheese Co. at all relevant times. Cheese Co. operated its pre- and post-bankruptcy business at 0 West Van Buren Street, Suite, Phoenix, Arizona (the Cheese Co. Business Premises.. Northern Wisconsin is a closely held corporation based in Manitowoc, Wisconsin, which has been owned for approximately 00 years by members of the Lindemann family. Among other activities of the company, Northern Wisconsin purchases bulk dairy and nondairy cheese products from other manufacturers, for processing and resale to customers including grocery stores and supermarkets. These cheese products are shipped to refrigerated warehouses in numerous markets throughout the United States. Northern Wisconsin pays these warehousemen to segregate and deliver its cheese products to local grocery retailers and food service distributors.. In order to have its product placed on grocery shelves, Northern Wisconsin pays slotting fees, ranging from several hundred dollars to as much as approximately $0,000, per item, to individual grocery retailers. In the Phoenix metropolitan area, Northern Wisconsin paid slotting fees to Bashas, Albertsons, Fry s (now Fred Meyer, ABCO, Value King, IGA, - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

3 0 0 Southwest Supermarkets, and Food City. In addition, Northern Wisconsin paid retailers for advertising and other sales promotions.. In the mid-0s, Northern Wisconsin developed a nondairy cheese product which, when heated, melts in a manner similar to dairy cheese, and which has a pleasing and distinctive taste. The nondairy cheese product is sold under the label and trade name Queso del Sol.. Starting in April of, Northern Wisconsin employed the Cheese Co. as its warehouseman in the Phoenix area. Northern Wisconsin s arrangement with Cheese Co. called for Cheese Co. to store Northern Wisconsin s cheese, principally the Queso del Sol product, in a refrigerated warehouse until Northern Wisconsin directed Cheese Co. to shred, bag, label, segregate, and, at times, deliver the cheese product to grocery retailers and food service distributors in the metropolitan Phoenix area and in other areas. At no time did Cheese Co. own Northern Wisconsin s product. Rather, Cheese Co. was paid, usually between 0 cents and cents per pound, for the services provided to Northern Wisconsin.. In November of 000, Bertola informed Steven Delaportas and Christopher Vasilas ( Vasilas that Cheese Co. was experiencing severe financial difficulties; that it was struggling to survive in its chapter bankruptcy; that most of the cheese held by Cheese Co. was owned by Northern Wisconsin; that Cheese Co. would receive bulk cheese shipments from or for the benefit of Northern Wisconsin, would refrigerate and warehouse Northern Wisconsin s product and would, upon Northern Wisconsin s request, shred, package, label, segregate, and ship Northern Wisconsin s cheese product to various food warehouses throughout Arizona, as well as distribution centers in California. Bertola also said that Cheese Co. was paid cents per pound of cheese product shredded for Northern Wisconsin. 0. Mr. Delaportas suggested to Bertola that he and Cheese Co. could make considerably more money if he and Cheese Co. worked together to put their own labels on cheese product shredded by Cheese Co. and then placed the newly labeled products in the slots previously purchased by Northern Wisconsin. Mr. Delaportas proposed that Cheese Co. - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

4 0 0 or its assets be taken over by Bertola and Mr. Delaportas company, Ionian, and that he and Cheese Co. push Northern Wisconsin out of the local market, to be replaced by cheese products relabeled with the new, similar label.. Mr. Delaportas suggested to Bertola that they acquire cheese and that Cheese Co. shred, bag, label, and ship the cheese product with the newly created label, and that such shipments be delivered to Northern Wisconsin s grocery market customers for placement in Northern Wisconsin s slots.. Ionian knew and understood that the cheese product in Cheese Co. s possession belonged to Northern Wisconsin and only to Northern Wisconsin, and intended that Northern Wisconsin s cheese product be used in its business scheme with Cheese Co.. In mid-january of 00, Northern Wisconsin was informed that its products were being replaced in stores by a product line called Queso del Sunshine, purportedly distributed by Ionian; that Cheese Co. and/or Ionian were shredding, bagging, and labeling Northern Wisconsin s cheese with the Ionian label, and then placing the Ionian-labeled product in the slots already paid for by Northern Wisconsin; that Bashas had been placing orders with Bertola for nondairy cheese product on a regular basis, and that those orders were being filled by Cheese Co. In fact, Northern Wisconsin s sales to Bashas had suddenly dropped to essentially nothing in early 00. Northern Wisconsin paid slotting fees to (a Albertsons in the amount of $,00.00, (b Bashas in the amount of $,00.00, (c Food City in the amount of $,00.00, and (d Fred Meyer in the amount of $, Copies of Northern Wisconsin s checks to Albertsons, Bashas, Food City and Fred Meyer in the aggregate amount of $,00.00 are attached hereto collectively as Exhibit A, and incorporated herein by reference.. No later than February, 00, Northern Wisconsin was informed by Cheese Co. that approximately four and one-half truckloads of Northern Wisconsin cheese product delivered to Cheese Co. had been transferred to Ionian, but that the sales proceeds had not been and could - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

5 0 0 not be remitted to Northern Wisconsin. Upon inspection of Cheese Co. s warehouse, Northern Wisconsin learned that the facility was almost empty, that only one to two truckloads of product identified as Northern Wisconsin product remained, and that no less than pallets (approximately,000 pounds of shredded and bagged cheese product bore the label Queso del Sunshine, which labels noted that the product was distributed by Ionian. By February, 00, the torts and contract breaches committed against Northern Wisconsin had been accomplished.. Effective as of February, 00, Northern Wisconsin entered into an Independent Contractor Agreement (the Agreement with ML, Ltd. ( ML. Northern Wisconsin hired ML to supervise Northern Wisconsin s counsel and Northern Wisconsin s interests in the Lawsuits (as that term is defined in the Agreement. Northern Wisconsin agreed to pay ML a fee of $, for each year of service to Northern Wisconsin commencing the calendar year of 00, and that such fees would not become due unless and until Northern Wisconsin first recovers $0, of its lost product damages. To date, ML has incurred fees of $, On October, 00, Northern Wisconsin filed an adversary complaint against Bertola in Bertola s chapter bankruptcy (the Bertola Adversary Proceeding. In October 00, a trial was held before the Honorable Randolph J. Haines in the U.S. Bankruptcy Court. Judge Haines awarded Northern Wisconsin judgment against Bertola in the amount of $0,0.0, plus interest (the Bertola Judgment. Copies of Judge Haines Findings of Fact and Conclusions of Law and the Bertola Judgment are attached hereto as Exhibits C and D, and are incorporated herein by reference. As of April, 00, the amount of the Bertola Judgment is $,., plus accruing interest at the rate of $. per diem. \ \ \ \ That agreement was memorialized in writing in 00. See Exhibit B. - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

6 0 0. On November, 00, Northern Wisconsin filed its complaint (the Federal Civil Case against Stephen J. Delaportas and Jane Doe Delaportas, husband and wife; Christopher Vasilas and Jane Doe Vasilas, husband and wife; and Ionian in the U.S. District Court for the District of Arizona, case number :0-cv--HRH.. On May, 00, Northern Wisconsin and Vasilas filed their stipulation to dismiss all claims against Vasilas in the Federal Civil Case. On May, 00, the Court approved the stipulation and dismissed all claims against Vasilas, with prejudice.. On January, 00, the United States of America (the Government filed a criminal complaint against Bertola and Mr. Delaportas in the U.S. District Court for the District of Arizona at case number :0-cr-0000-FJM (the Federal Criminal Case. Bertola entered a guilty plea for wire fraud, aiding and abetting, and false, and was sentenced to eight ( months in prison, and three ( years supervised release. Mr. Delaportas entered a guilty plea for accessory after the fact to concealment in bankruptcy and was sentenced to five ( years probation. Further, the Court entered judgment in favor of the Government and against Bertola and Mr. Delaportas, jointly and severally, in the amount of $,0.. Proceedings in the Federal Civil Case were stayed pending a resolution of the Federal Criminal Case. Restitution payments totaling $,00.00 have been paid to Northern Wisconsin to date. Conversion 0. Beginning in December 000 through February 00, Ionian wrongfully exercised dominion and control over, and thereby converted to its own use, Northern Wisconsin s cheese product, entrusted by Northern Wisconsin to Bertola and the Cheese Co. Tortious Interference with Contracts and Business Expectancies. Northern Wisconsin had, at all relevant times, established contractual relationships and business expectancies with the Cheese Co., Bertola, and various retail grocers in the Phoenix metropolitan area.. Ionian was aware of these established contractual relationships and business - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

7 0 0 expectancies.. In the years prior to Defendants tortious interference with Northern Wisconsin s contracts and interference with its business expectancies, Northern Wisconsin was enjoying annual profits of not less than $00, per year in connection with its dairy and nondairy cheese sales in the Arizona market, all of which were originating through The Cheese Company. Northern Wisconsin believed and maintains those annual profits would have continued well into the future but, for the purposes of this litigation, seeks lost profit damages in an amount totaling years times $00, per year, i.e. $,00, Aiding and Abetting Breach of Fiduciary Duties. Bertola and the Cheese Co., as Northern Wisconsin s warehouseman, had fiduciary duties to Northern Wisconsin and were liable to Northern Wisconsin pursuant to A.R.S. - 0(A for loss or injury to Northern Wisconsin s property.. In addition, Bertola was the person designated as the party responsible to handle the bankruptcy affairs of the Cheese Co. while it served as debtor-in-possession in the Cheese Co. Bankruptcy. Bertola had a fiduciary duty to creditors and customers of the Cheese Co., including but not limited to Northern Wisconsin. The Cheese Co. was insolvent from and after mid-october In acting as described above, Bertola and the Cheese Co. breached fiduciary duties to Northern Wisconsin.. In acting as described above, Ionian (a gave substantial assistance or encouragement to Bertola and the Cheese Co., knowing that the acts of Bertola and the Cheese Co. constituted a breach of duties owed to Northern Wisconsin and (b engaged in a common plan or scheme in concert with Bertola and the Cheese Co. Unfair Competition. The public recognizes Northern Wisconsin s Queso del Sol package, size, shape, color, design, and label as identifying Northern Wisconsin s nondairy cheese produce and - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

8 0 0 distinguishing that product from product sold by others.. Such recognition occurred before Ionian entered the market with its Queso del Sunshine packaged label. 0. Ionian s use of the Queso del Sunshine package and label caused confusion as to the source of the nondairy cheese product among persons using ordinary care and prudence in its purchase. Punitive Damages. Ionian s acts, as described above, were committed with the requisite evil mind, that is, an intent to injure Northern Wisconsin, or an intent to serve its own interests, having reason to know and consciously disregarding the substantial risk that its conduct might significantly injure Northern Wisconsin s rights. Northern Wisconsin contends a fair measure of punitive damage would be multiplying Northern Wisconsin s hard damages (stolen cheese produce of $0,0.0 plus stolen slots of $,00.00 times a factor of. (i.e. $,0.0 x = $,0,.0. See State Farm Mut. Auto. Ins. Co. v. Campbell, U.S. 0, 0, S.Ct., (00.. Northern Wisconsin has incurred damages as follows: a. Ionian s acts against Northern Wisconsin caused Northern Wisconsin to incur lost cheese product damages in the amount of $0,0.0, as was proven in the Bertola Adversary Proceeding. b. Northern Wisconsin incurred damages in the amount of $,00.00 as a result of Ionian placing its stolen product into grocery store slots paid for by Northern Wisconsin. c. Northern Wisconsin has incurred damages in the amount of $, for fees owed to ML pursuant to the Agreement. d. Northern Wisconsin incurred damages in the amount of not less than $,00, due to its lost profits and Defendants tortious interference with - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

9 0 0 Northern Wisconsin s contracts and business expectancies. e. Northern Wisconsin is entitled to an award of punitive damages in the amount of $,0,.0. f. Attorneys fees and costs in an amount to be reflected in Northern Wisconsin s application for attorneys fees and statement of costs, to soon be filed with the Court. The above statements are true and correct to the best of my knowledge and belief. /s/ Daniel P. Collins 000 Daniel P. Collins SUBSCRIBED AND SWORN to before me this th day of May, 00, by Daniel P. Collins of the law firm Collins, May, Potenza, Baran & Gillespie, P.C., counsel for Plaintiff Northern Wisconsin Produce Company, Inc. My Commission Expires: December, 00 /s/ Denine Downs Notary Public - - Case :0-cv-0-HRH Document Filed 0//00 Page of 0

10 0 0 COPY of the foregoing mailed this th day of May, 00 to: Honorable H. Russell Holland United States District Court West th Avenue - # Anchorage, Alaska Ionian Foods, LLC Post Office Box 0 Phoenix, Arizona 0 Defendant Steven J. Delaportas Post Office Box 0 Phoenix, Arizona 0 Defendant Joanne Delaportas aka Joanne Guggino West Vale Drive Goodyear, Arizona /s/ Denine Downs Case :0-cv-0-HRH Document Filed 0//00 Page 0 of 0