E. D. Lacey Mills, Inc. v. Keith Et Al.; and v.ce v.rsa., 183 Ga. App. 357, 359 S.E.2d 148 (1987)
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Judgment affirmed in part and reversed in part. Birdsong, C. J., and Deen, P. J., concur.
Summary
Judgment affirmed in part and reversed in part. Birdsong, C. J., and Deen, P. J., concur.
Text
Charles T. Lester, Jr., R. Michael Robinson, T. Joseph Campbell, L. Hugh Kemp, for appellant.
E. D. Lacey Mills, Inc., d/b/a Lacey Rug Mills ("Lacey"), is a manufacturer of bathroom rugs. In July of 1981, Lacey's president and, at that time, sole owner, commenced negotiations with defendant Shakley for employment with Lacey. Shakley accepted a position as Lacey's vice-president in charge of sales. During negotiations Shakley convinced Lacey's president also to hire defendant Keith, who was at that time employed as vice-president in charge of manufacturing by a competing rug manufacturer. Shakley and Keith had previously worked together as a team for the competing manufacturer before Shakley was dismissed. According to the testimony of Shakley and Keith, it was their lifelong goal to own a rug mill. They believed the arrangement with Lacey offered them that opportunity.
All parties agree that the defendants' employment contracts were oral and terminable at will. For purposes of its motion for summary judgment brought before the trial court, Lacey admits the terms of the agreements were as follows: Shakley was to receive as his compensation a commission of two percent of Lacey's annual sales with $96,000 as a draw against commissions; Keith was to receive a beginning salary of $50,000 to be raised to $70,000 within one year of his employment or when the company became profitable, if sooner; both Keith and Shakley were to receive five percent of plaintiff's stock as a gift; both Keith and Shakley were offered an option to purchase an additional nineteen percent of Lacey's stock for $200,000 and a final eleven percent, the controlling shares, for $100,000, with financing for the sale to be provided by Lacey's factoring agent; and both Keith and Shakley would be paid three and one-third percent of Lacey's annual pre-tax profits as an annual performance bonus. Lacey further admits its president, in order to induce Keith to leave his previous position immediately, promised Keith he would receive the balance of any bonus or other sums owed to him by his previous employer if not paid in full because of his leaving prior to the date the bonus was to be paid.
Lacey admits defendants performed well and in the years 1983 and 1984 Lacey showed its greatest net profits in over ten years. In July 1984 Lacey's president presented both Keith and Shakley with five percent of the stock, as promised in the employment agreement. He also presented them with a written stock option agreement for the sale of the additional shares of stock. While the proposed stock option agreement offered the first nineteen percent of stock at the $200,000 price agreed upon, it did not provide any means for financing the sale. The proposed written agreement outlined a formula for calculating the price of the final eleven percent of stock which greatly exceeded the original agreement to sell that stock for $100,000. When the parties could not agree to the terms of the stock options, Keith and Shakley began exploring other alternatives for fulfilling their goal of owning a rug mill. While still employed by Lacey, both Keith and Shakley made numerous contacts with, among others, the trustee in bankruptcy for the facilities owned by their now defunct previous employer. They retained an attorney to draft articles of incorporation for a new company and paid earnest money to the trustee in bankruptcy for an option to purchase the facilities of the bankrupt mill. When Lacey's president learned of these activities, Keith was fired and shortly thereafter defendant Shakley resigned. Keith and Shakley immediately went into business in direct competition with Lacey, hiring eighteen of Lacey's 200 employees and retaining seventeen of Lacey's twenty-one sales representatives.
In a multi-count complaint, as amended, Lacey sued Keith and Shakley for damages for the lost value of their services for that time spent working for the interest of their new company; breach of their fiduciary duties in contacting Lacey's employees and sales representatives; tortious interference with contract for inducing employees to leave Lacey's employ; violation of the Uniform Deceptive Trade Practices Act, OCGA
1. Lacey's first three enumerations of error take exception to the trial court's grant of summary judgment to Keith and Shakley (hereinafter "defendants") as to Count 8 of the amended complaint, which alleges violation of the Lanham Act. We disagree with the trial court's finding that Lacey's pleadings have been pierced as to this allegation and therefore reverse the grant of summary judgment as to Count 8.
The mere copying of Lacey's rug styles would not give rise to a cause of action under the Lanham Act since "there exists a fundamental right to compete through imitation. . . ." In re Morton-Norwich Prods., 671 F2d 1332, 1336 (C.C.P.A. 1982). However, a claim for violation of the Lanham Act is stated where a plaintiff alleges its competitor copied its styles, coloring and sales packaging so as to create confusion among potential customers as to the origin of the goods. Federal-Mogul-Bower Bearings v. Azoff, 313 F2d 405 (6th Cir. 1963); Dave Grossman Designs v. Bortin, 347 FSupp. 1150 (IV) (N.D. Ill. 1972). In the Bortin case, the defendant moving for summary judgment submitted into evidence copies of the product and packaging used by each party, yet the court found insufficient evidence to make a ruling on whether the defendant's trade dress was likely to create confusion or misunderstanding and, therefore, denied the motion for summary judgment. In the case sub judice, defendants based their motion for summary judgment on a simple denial of the plaintiff's allegations. The record is void of any evidence whatsoever concerning the labels for the rugs in question or the issue of customer confusion; therefore, no finding on this issue could properly be made. Since this is a motion for summary judgment, the burden is upon the movant to refute the plaintiff's allegations; plaintiff is not required to present evidence to support the allegations but may resist a motion for summary judgment by doing nothing, relying on the failure of the movant to remove all issues of fact from the case. Cf. Benefield v. Malone,
2. Lacey maintains the trial court erred in denying its motion for summary judgment on defendant Shakley's counterclaim for commissions allegedly earned. The parties agree Shakley's oral employment contract was terminable at will. For purposes of its motion for partial Summary judgment, Lacey admits that under the terms of the employment agreement Shakley was to be compensated by a two percent commission. Nevertheless, Lacey argues the compensation agreement is unenforceable as an executory promise. It is true an employee cannot sue to enforce future performance of a terminable-at-will employment agreement. However, an employee may sue on an oral contract for employment terminable at will "for the amount of compensation due him, based upon services actually performed by him up to the time of his discharge, and not for damages or for compensation for services not performed or for any breach of contract." Brazzeal v. Commercial Cas. Ins. Co.,
3. On the other hand, we agree the trial court erred in denying Lacey's motion for summary judgment on defendant Keith's counterclaim to recover the $25,000 year-end bonus which he allegedly earned from his previous employer but lost when he resigned prior to the end of the year. We reject Lacey's argument that the promise to pay Keith the balance of any sums owed to him by the previous employer was an agreement to pay the debt of another and thereby unenforceable under the terms of the Statute of Frauds. Lacey's promise was an original undertaking and thereby not subject to the Statute of Frauds since Lacey made the promise for its own economic advantage rather than for the benefit of the original debtor. See Thomason v. Pease Co.,
4. Defendants' Cross-Appeal, No. 74241. Defendants contend the trial court erred by resolving certain disputed factual issues which are for resolution by the jury. Defendants maintain the trial court made findings of fact which transformed the summary judgment adjudication into a bench trial and therefore claim the entire order should be vacated. We find the trial court made no improper findings of fact but merely erred in defendants' favor in determining no issue of fact existed in regard to Count 8 of Lacey's complaint, which we reverse in Division 1 of this opinion. We find defendants' first enumeration of error has no merit.
5. We uphold the trial court's grant of summary judgment to Lacey on defendants' counterclaim for unpaid year-end bonuses. For purposes of its motion for summary judgment, Lacey admits it agreed during employment negotiations in 1981 to pay defendants an annual pre-tax performance bonus of a certain percentage of profits beginning in 1982. Lacey admits this promise was made as part of the initial compensation offer to induce defendants to accept employment. Therefore, this promise is distinguishable from an unenforceable promise to change the terms of compensation in the future, as described in Division 3 of this opinion. Normally, "[s]uch a promise, made at the beginning of the employment, is enforceable, though it would not be if made pending the term or after performance was complete." Phillips & Co. v. Hudson,
Defendant Keith contends the promise to increase salary is no longer executory since he performed under the contract and argues an employee may maintain an action to recover damages for breach of an oral contract of employment when the employee has performed the requested services. The cases cited by defendant are distinguishable since they involve enforcement of the original agreement for compensation and not a promise for a future increase in compensation. See Hirsch's v. Adams,
For the first time on appeal, defendant Keith claims he is entitled to recover the promised wage increase on the theory of promissory estoppel. We need not address this argument because "such ground for recovery was not set out in [Keith's counterclaim] and was not made a part of the trial judge's ruling. 'This court reviews rulings, and a failure to rule when there was no request therefor will not be reviewed by this court.' Nash v. Crowe,
7. We affirm the grant of summary judgment to Lacey on defendants' counterclaim for breach of the stock purchase agreement. Lacey admits it orally promised to sell the defendants stock at a given price "once plaintiff became profitable." Defendant Keith testified it was his understanding the stock option could be exercised "if we could turn the company around" so the company's creditor had a "performing loan." It was his understanding the option could be exercised "after . . . we [paid] down the [creditor's] debts." We find these terms create a condition precedent which is so vague and indefinite the contract is unenforceable. In Dale's Shoe Store v. Dale,
8. We affirm the grant of summary judgment to Lacey on defendant Keith's counterclaim for breach of Lacey's agreement to pay the balance of stock option funds allegedly owed him by his previous employer for reasons set forth in Division 3.
9. We affirm the trial court's denial of defendants' motion for summary judgment on Counts 1 and 2 of Lacey's complaint, alleging breach of fiduciary duty. We agree an employee breaches no fiduciary duty to the employer simply by making plans to enter a competing business while he is still employed. "Even before the termination of his agency, he is entitled to make arrangements to compete. . . . Thus, before the end of his employment, he can properly purchase a rival business and upon termination of employment immediately compete." Restatement 2nd of Agency, 393 (1958). Nevertheless, the record contains sufficient evidence to raise a jury question as to whether defendants fulfilled their duties to Lacey as full-time paid employees during the months they made plans for their new company. Defendants admittedly conducted numerous meetings and telephone calls in pursuit of their plans. Testimony from one of Lacey's secretaries established defendant Keith was frequently absent from the office from January 1985 through the date of his departure. The record also shows the defendants broached the subject of their plans to go into business in competition with Lacey to certain of Lacey's sales representatives in the months prior to their departure. Even though an employee may make plans to compete with his employer while still employed, "[h]e is not, however, entitled to solicit customers for [a] rival business before the end of his employment nor can he properly do other similar acts in direct competition with the employer's business." Restatement 2nd of Agency. Id. The record contains sufficient evidence to create a question for the jury as to whether defendants breached their fiduciary duties to Lacey.
10. We affirm the trial court's denial of defendants' motion for summary judgment on Count 4 of Lacey's complaint, alleging tortious interference with Lacey's contracts with its employees and sales representatives. Defendants are correct in arguing the law grants a former employee a privilege to compete with his former employer for customers and employees. An individual is not liable for interference with contractual relations for the hiring away of a competitor's terminable-at-will employee if "(a) the relation concerns a matter involved in the competition between the actor and the other and (b) the actor does not employ wrongful means and (c) his action does not create or continue an unlawful restraint of trade and (d) his purpose is at least in part to advance his interest in competing with the other." Restatement (2nd) of Torts 768 (1965). On the other hand, "[t]he fact that an employment is at the will of the employer and employee does not make it one at the will of others, and a malicious and wrongful interference with such employment by another is actionable although the employment be at will." Ott v. Gandy,
Bruce C. Smith, Joseph R. Manning, Sam F. Little, for appellees.
1987
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