Maness v. Collins

2010 WL 4629614 (2010)

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Nature of the Case

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Facts

P incorporated his own wood manufacturing business, SKM. Within several years, it grew to have annual sales of several million dollars, with approximately twenty-five employees. Ds approached P about the possibility of purchasing SKM. D told P that her brother-in-law, Mike Smith, and his son, Josh Smith, would be her partners in purchasing and operating the business. Mike took the lead role in negotiating the sale. Not long before the negotiations began, Josh was hospitalized for treatment for drug addiction issues; this fact was not disclosed to P during the negotiations. D, a certified public accountant, expected to maintain her full-time employment as a financial advisor and handle the new business's payroll and financial matters on a part-time basis. Mike expected to keep his full-time employment elsewhere and work part-time at SKM. Josh had a college degree in business and marketing and had worked for a woodworking company; he was expected to be the 'managing member,' that is, to work full-time at SKM, supervising and managing the day-to-day operations. All parties expected that, after the acquisition, P would remain with SKM as an employee. In anticipation of the sale, Josh was hired by SKM and began working under P's supervision. The parties executed an asset purchase agreement under which SKM's assets were sold to SKM, LLC, with Ds, the guarantors. Part of the total $1,300,000 purchase price was paid by a $300,000 promissory note. P was to be employed for three years, at an annual salary of $67,600. P also signed a non-competition and non-solicitation agreement. The noncompetition agreement had a geographic area of the entire continental United States, for a time period of five years after P's employment with SKM ended. P worked but continued to discipline employees as he always had. Ds perceived his interactions with the employees as unacceptably confrontational. P fired an employee after a heated confrontation in which the employee spoke to P in a manner that he perceived as disrespectful of his authority. Ds admonished P for the termination and rehired the employee. Ds indicated to P that he did not have the authority to discharge employees. P's working relationship with the new owners deteriorated precipitously after that. Ds terminated P's employment. P filed a lawsuit alleging breach of the employment agreement and asserted that the non-competition agreement was unenforceable. During trial, P stated he witnessed Josh in what appeared to be a drug transaction and when he informed Ds, he was terminated. Since his employment with SKM ended, P had not been employed. Maness conceded that he did not seek new employment, but instead focused on building a new house for himself. The trial judge found that Josh was responsible for the daily operations of SKM and that he suffered from 'extreme drug addiction.' It found that P's work performance was generally satisfactory until the new owners rescinded P's firing of the problem employee. After that, the trial court said, 'everything went downhill.' The trial judge credited the testimony of witnesses who testified that, unbeknownst to Mike and D, Josh attempted to undercut P's authority and to have P's employment terminated. The trial court found that P, as a wrongfully terminated employee, had a duty to mitigate his damages, but instead took no action. It awarded P no damages.