Maytag Corp. last week lost the first round of a legal battle to keep the man known to soft-drink industry insiders as "Mr. Vending Machine" from starting up a rival to its soft-drink vending machine manufacturing subsidiary.
A federal court jury in Alexandria last week ruled that Roy Steeley, a Leesburg resident and former president of Maytag subsidiary Dixie-Narco, had not breached his fiduciary obligations to the company by making plans for a competitive business during the six months before he retired.
The jury rejected Maytag's claim that Steeley must return to Dixie-Narco nearly $1 million in salary, severance payments, bonuses and stock options that he received during those six months. The jury also determined that Steeley was entitled to $11,000 under a deferred compensation agreement with Maytag's subsidiary, Magic Chef Inc.
Steeley, 68, who served as president of Dixie-Narco for 17 years and worked at the firm for more than 30 years, is regarded by analysts as a pioneer in the highly concentrated soft-drink vending machine manufacturing industry. Under his direction, the Ranson, W.Va.-based manufacturer's annual sales grew from about $2 million to $152 million last year.
The firm currently commands more than 65 percent of the $260 million annually spent on soft-drink vending machines, according to Bruce Oman, an analyst with MSI Inc., a beverage consulting firm based in Kenner, La.
"Roy Steeley played a key role in the growth of the soft-drink vending machine industry," Oman said. "He took Dixie-Narco right to the top and kept it there. He's the type of guy that when he sets his mind to doing something, he does it."
Steeley informed Maytag's top management in October that he planned to retire and start up a rival vending machine manufacturing company.
Maytag alleged that Steeley, while he was still employed by Dixie-Narco, spent time and effort planning the start-up of his new firm at the expense of his duties at Dixie-Narco.
"He hired a man to do legwork for him, he took a trip to California to raise money for the new company, and he had his legman contact bankers and real estate brokers in preparation for it," said Thomas Morsch, an attorney representing Dixie-Narco.
"We had no objection to him starting up a new company after he left. If he had made a clean break and not done preparatory work for his new company while still on the Dixie-Narco payroll, there would not have been a lawsuit," Morsch said.
Maytag's decision to sue Steeley was prompted by the former president's behavior at a retirement dinner given in his honor a week after he left the company, Morsch said. In a speech after the dinner, Steeley announced plans to form the adversary firm and invited Dixie-Narco employes to come work for him, he said.
Steeley denies that he attempted to recruit Dixie-Narco employes at the dinner. He added that it would not have been inappropriate because he was a "free man," no longer on the company payroll.
To date, only one former Dixie-Narco employe has been hired by his new company, Royal Vendors.
According to Steeley's lawyer, Charles Eisen, Maytag executives are using the lawsuit to try to delay a potentially formidable adversary.
"Essentially, Maytag's complaint is that Steeley is so competent and so trusted that he's sure to be a threat to them," said Eisen.
Senior officials at Dixie-Narco sent a memo to top management at Maytag last fall outlining a protracted legal battle as one of several strategies for discouraging Steeley from getting into the industry, Eisen said.
Maytag plans to appeal last week's decision, and will seek an injunction to prevent Steeley from starting a new business, according to Morsch. "We have lost round one. Now comes round two," Morsch said.
Currently, Dixie-Narco shares the soft-drink vending machine with only one other major player, Vendo Corp., based in Fresno, Calif. Together, Dixie-Narco and Vendo control more than 95 percent of the soft-drink vending machine manufacturing market, according to Oman.
Steeley decided to step down as president of Dixie-Narco four months after Magic Chef Inc., the firm's parent company, was acquired by Maytag.
Although Maytag management asked him to remain as president and appointed him to the Maytag board of directors, Steeley said he was uncomfortable with the Iowa appliance manufacturer's management style.
"After the merger, there were a lot of changes made, and I didn't have the same feeling for the company," said Steeley. "They're more structured than I'm used to. They insisted everything be conducted through certain channels."
Steeley says he harbors no ill will toward Maytag management and that his decision to start a new firm reflects his desire to continue "performing a valuable service."
"Some people can go out and play golf every day and be happy," he said. "But that's not me."
Last week's verdict clears the way for Royal Vendors, which was incorporated in February, to go ahead with plans to begin manufacturing and shipping vending machines by early next year. The Charles Town, W.Va.-based company has no production facilities yet, but will open factories in Jefferson County, W.Va., Steeley said.