Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

American Consulting, Inc. v. Hannum Wagle & Cline Engineering, Inc.

Court of Appeals of Indiana

May 23, 2018

American Consulting, Inc. d/b/a American Structurepoint, Inc., Appellant-Plaintiff/Cross-Appellee,
v.
Hannum Wagle & Cline Engineering, Inc. d/b/a HWC Engineering, Inc., Marlin A. Knowles, Jr., Jonathan A. Day, Tom Mobley, and David Lancet, Appellees-Defendants/Cross-Appellants.

          Appeal from the Marion Superior Court The Honorable Heather A. Welch, Special Judge Trial Court Cause No. 49D01-1503-PL-7463

          ATTORNEYS FOR APPELLANT David M. Mattingly Michael A. Wukmer Mary Nold Larimore Mark R. Alson Robert A. Jorczak Ice Miller, LLP Indianapolis, Indiana

          ATTORNEYS FOR APPELLEES David L. Swider Andrew M. McNeil Philip R. Zimmerly Bose McKinney & Evans, LLP Indianapolis, Indiana

          ROBB, JUDGE.

         Case Summary and Issues

         [¶1] American Consulting, Inc., d/b/a American Structurepoint, Inc. ("ASI"), appeals the trial court's partial summary judgment in favor of Hannum Wagle & Cline Engineering, Inc., d/b/a HWC Engineering, Inc. ("HWC"), Marlin A. Knowles, Jr., Jonathan A. Day, Tom Mobley, and David Lancet (collectively, the "HWC Parties").[1]

         [¶2] On appeal, ASI raises one issue, which we restate as whether the trial court erred in granting summary judgment to the HWC Parties on ASI's claims for liquidated damages resulting from alleged breaches in employment contracts by former ASI employees. On cross-appeal, the HWC Parties raise two issues, which we restate as: (1) whether the trial court should have granted summary judgment to the HWC Parties on ASI's claims regarding tortious interference with contractual relationships; and (2) whether the trial court should have granted summary judgment to the HWC Parties on ASI's claims regarding breach of employment contracts by former ASI employees.

         [¶3] On ASI's appeal, we conclude the trial court erred in granting summary judgment to the HWC Parties on the issue of liquidated damages, and we reverse that part of the trial court's order. On the HWC Parties' cross-appeal, we conclude the trial court properly denied the HWC Parties' motion for summary judgment on ASI's claims of tortious interference with a contractual relationship and breach of contract, and we affirm as to those counts.

         Facts and Procedural History

         [¶4] ASI is a civil engineering, architecture, planning, and design firm with offices in Indiana and several other states. HWC is also a civil engineering, architecture, planning, and design firm with offices in Indiana. ASI and HWC are competitors, and both provide services to public and private entities.

         I. Employment at ASI

         [¶5] In 1994, Knowles began working for ASI as a construction inspector. Over the years, he was promoted, and by approximately 2004, his title was Vice President of Sales Administration. In 2008, Knowles acquired an ownership interest in ASI. On December 29, 2008, Knowles and ASI executed an Employment, Non-Disclosure and Non-Competition Agreement (the "Knowles Agreement"). Knowles agreed to several restrictive covenants as a condition of his employment with, and his equity interest in, ASI; specifically, the Knowles Agreement included both a non-compete provision and a non-recruitment clause. The non-compete provision precluded Knowles for two years following his termination of employment with ASI from selling, providing, attempting to sell or provide, or assisting any person in the sale or provision of competing products or services to ASI's customers with whom Knowles had contact on behalf of ASI in the two years preceding his termination. The non-compete provision further precluded Knowles from selling, providing, attempting to sell or provide, or assisting any person in the sale or provision of competing products or services to any of ASI's active prospects. In addition, the non-recruitment clause precluded Knowles for the same two-year period from directly or indirectly soliciting, recruiting, hiring, or employing (or attempting to do the same) any ASI employee or otherwise inducing any ASI employee to terminate their employment at ASI.

         [¶6] The Knowles Agreement further stipulated that any breach of a restrictive covenant would "give rise to irreparable injury to [ASI]." Corrected Appendix to Amended Appellant's Brief, Volume III at 205. Accordingly, the Knowles Agreement provided for specific remedies in the event of a breach. In part, in the event Knowles breached the non-compete provisions relating to the provision of services or solicitation of ASI clients, which resulted in the client terminating, withdrawing, or reducing its business with ASI, or purchasing any competing products or services from Knowles or a company with which Knowles was affiliated at the time of the breach, the Knowles Agreement mandated that Knowles "shall pay to [ASI] liquidated damages in an amount equal to forty five percent (45%) of all fees and other amounts that [ASI] billed to such customer during the [twelve]-month period immediately preceding such breach[.]" Id. Similarly, in the event Knowles violated the non-recruitment of ASI employees provision, "which results in an employee terminating his/her employment with [ASI], " the Knowles Agreement stipulated that he "shall pay to [ASI] liquidated damages in an amount equal to fifty percent (50%) of such terminating employee's total compensation from [ASI] for the twelve (12) months immediately preceding such employee's termination of employment." Id., Vol. III at 205-06.

         [¶7] In 1998, Lancet was hired at ASI, and in 2004, he was promoted to the position of field manager. As a result of his promotion, on April 1, 2004, Lancet executed an Employment Agreement with ASI, which contained non-recruitment and non-compete clauses. In 2007, Lancet was demoted to a resident project representative. At the time of the demotion, Lancet believed that his employment agreement would be deemed invalid. Nevertheless, on January 31, 2007, Lancet executed certain Terms and Conditions of Employment with ASI (the "Lancet Agreement"). This new agreement also included a non-recruitment clause, providing that for a period of two years following his termination of employment with ASI, Lancet would not solicit or offer employment to any ASI employee, or assist others to do the same. In the event that Lancet "engage[d] in conduct that violates these restrictions and causes an employee to terminate his/her employment with [ASI], " Lancet agreed to "pay to [ASI] liquidated damages in an amount equal to 100% of such employee's annual salary for the preceding calendar year." Id., Vol. III at 196. Lancet did not recall signing the Lancet Agreement; he claimed that he did not read it prior to signing and did not receive a copy of it.

         [¶8] In 2003, Mobley was hired at ASI as an inspector. It does not appear that he was ever required to execute an employment agreement. In 2004, Day was hired at ASI as an inspector as well. He was eventually promoted to a resident project representative. On January 3, 2005, Day executed Terms and Conditions of Employment (the "Day Agreement") with ASI. The Day Agreement, like the Knowles and Lancet Agreements, included a non-recruitment clause, providing that during his employment at ASI and for a period of two years thereafter, he would not solicit or offer employment to any ASI employee, or assist others to do the same. In the event that Day breached his covenant, thereby "caus[ing] an employee to terminate his/her employment with [ASI, ]" Day agreed that he "shall pay to [ASI] liquidated damages in an amount equal to 100% of such employee's annual salary for the preceding calendar year." Id., Vol. III at 121.

         [¶9] At ASI, Knowles was responsible for generating business and developing the company's goodwill. His goal was to "[b]uild a relationship with a client. Identify a project. Help them figure out how to deliver that project or get funding for that project." Id., Vol. VI at 76. Knowles was the "principal in charge" for public clients that included the Town of Cicero, Delaware County, the City of Fishers, Grant County, the City of Greendale, Hamilton County, Hancock County, the Indiana Department of Transportation ("INDOT"), LaGrange County, the City of Lawrenceburg, Morgan County, the City of Noblesville, Orange County, and Putnam County. Id., Vol. V at 152.

         II. Move to HWC

         A. Knowles

         [¶10] At the end of 2013, Knowles became dissatisfied with his employment at ASI and began searching for new opportunities. Knowles met with HWC's President, Edward Jolliffe, and HWC's Executive Vice President, Terry Baker. Jolliffe and Baker were aware of Knowles' experience and "stellar" reputation in the industry. Id., Vol. V at 218. They wanted to hire Knowles with the intent that he would eventually take over the company. During their initial meetings, Knowles discussed his ASI agreement with Jolliffe and Baker, and they intended to honor the Knowles Agreement "by putting him in operations rather than running sales-being in the sales cycle." Id., Vol. V at 220. Jolliffe and Baker also desired for Knowles to overhaul HWC's transportation division, which was headed by Randy Hancock.

         [¶11] On May 5, 2014, Knowles resigned from ASI. In his resignation letter, he informed ASI that he was "very aware of and will honor my existing employment contract as I have such respect for this great company and all the wonderful people here." Id., Vol. III at 167. Knowles' last day of work at ASI was May 14, 2014. On May 19, 2014, HWC issued a press release announcing its hiring of Knowles as its Vice President of Operations. HWC forwarded the announcement to a list of "key clients" that Knowles formulated. Id., Vol. VII at 99.

         [¶12] At the time Knowles left ASI, he had a list of clients with whom he had worked; however, he did not share this list with Jolliffe, Baker, or other HWC colleagues-believing that to do so would have been a violation of the Knowles Agreement. Ultimately, he threw the client list away "[b]ecause I was not supposed to have material that was [ASI's]." Id., Vol. VI at 74. Instead, he relied on his memory and own personal judgment for determining whether he was prohibited from contacting clients based on their status as former, current, or prospective clients of ASI. Based on his discussions with Jolliffe and Baker, it was clear that Knowles understood that "[h]e was not to call on [ASI's] customers. And he was not to recruit their employees." Id., Vol. III at 16. Knowles was responsible for "self-polic[ing]" his activity to ensure compliance with his restrictive covenants. Id., Vol. VI at 75.

         [¶13] Since joining HWC, it is undisputed that Knowles has been involved in contract negotiations and contract signings with at least the following ASI clients: City of Indianapolis, City of Muncie, Hamilton County, INDOT, Hancock County, City of Greenwood, City of Marion, City of Crawfordsville, Town of Cicero, City of New Albany, and City of Seymour. Although there is evidence indicating that Knowles was never directly involved in working with these clients in order to secure the projects for HWC, he did subsequently engage with the clients in order to finalize details and ensure the provision of the requested services. In addition, the undisputed evidence establishes that Knowles has maintained communication with a number of ASI clients since his departure for HWC. As a result of his position in the civil engineering industry, Knowles developed friendly relationships with many public officials who have responsibility for selecting engineering firms for public projects. Knowles has golfed, played poker, attended fishing trips, attended charity events, and met for meals and drinks with representatives of entities that ASI services. He has interacted with numerous officials at various industry events and conferences and has engaged in phone or texting conversations with some. According to Knowles, spending time with clients-be it through breakfast meetings, playing golf, going fishing, etc.-is a necessary part of building a relationship that will prompt "them to want to do business with me." Id., Vol. VI at 78. However, a plethora of individuals (i.e., representatives of ASI clients) with whom Knowles had communicated submitted declarations, averring that none of their interactions with Knowles included any attempt on his part to solicit work on behalf of HWC.

         B. Other ASI Employees

         [¶14] Following Knowles' departure from ASI, a number of other ASI employees began exploring their options for new employment as well. Shortly after Knowles' departure from ASI, Clinton Sparks, an ASI employee, inquired with Knowles about employment with HWC. When Knowles indicated that he could not have such a discussion with Sparks, Sparks accessed HWC's website and found a list of approximately fifteen to twenty job openings. Accordingly, Sparks submitted his resume through HWC's website. Hancock, as the director of the transportation division for HWC, reports to Knowles and is responsible for hiring all staff in the transportation group. When Hancock received Sparks' resume, he forwarded it to Knowles and Jolliffe and indicated that it was the "[f]irst of perhaps many?" Id., Vol. VII at 105. Hancock asked Knowles about Sparks' qualifications, and Knowles also reported to Jolliffe that Sparks is "a good engineer" who "knows how to make money in our business." Id., Vol. VI at 92. Jolliffe subsequently interviewed Sparks and extended an offer of employment. Instead of informing ASI that he was transferring to HWC, Sparks announced his departure as a retirement.

         [¶15] On August 11, 2014, Sparks began his job at HWC. Thereafter, he engaged in conversations with Hancock regarding "potential engineers." Id., Vol. VI at 177. Sparks reached out to Lancet at ASI and asked if Lancet "knew of anybody that was unhappy or had any potential candidates." Id., Vol. VI at 59. In response, Lancet suggested Amber Tolle, an ASI construction inspector and road designer. Sparks advised Lancet to delete their correspondence "because if the sharks [at ASI] smell the blood who knows." Id., Vol. VI at 45. The following month, Sparks met Tolle for lunch and discussed her prospects at HWC. Tolle "had grown unhappy with ASI during the last several years of [her] employment" and "did not feel like [she] was being used to [her] full potential." Id., Vol. IV at 3. Because Sparks seemed so happy at HWC, Tolle applied. When Hancock received Tolle's resume, he consulted with Knowles about her potential employment. In October of 2014, Hancock interviewed Tolle and advised her that HWC might have a position for her in early 2015. Around that time, Sparks misdirected an email with Tolle's application information to Knowles' former ASI email address, which was still being monitored by ASI, thereby alerting ASI to possible poaching efforts by HWC and Knowles. On March 3, 2015, Tolle received an offer from HWC.

         [¶16] Also within a few weeks of Knowles moving to HWC, Day advised Knowles that he, too, was "ready to leave [ASI] and that he was going to submit a [resume] to HWC." Id., Vol. VI at 94. Upon receipt of Day's resume, Hancock conferred with Knowles regarding Day's qualifications; Knowles offered a favorable recommendation. Knowles also informed Jolliffe that Day "was a good guy. He did a good job at [ASI]." Id., Vol. VI at 97. Jolliffe subsequently interviewed Day, and during the interview, Day advised Jolliffe that Lancet was also interested in leaving ASI for a career at HWC. On August 8, 2014, HWC sent an offer letter to Day. On August 11, 2014, Day submitted his resignation to ASI. During his exit interview, ASI did not remind Day that he had executed the Day Agreement, and Day testified that he was unaware that he was bound by any restrictive covenants. The next day, he accepted HWC's offer of employment.

         [¶17] Within a month of beginning his job at HWC, Day compiled a spreadsheet of potential recruits for HWC. Nine of the ten potential recruits on the list were ASI employees, including, in part: Lancet, Chris Holth, Mobley, Tim Conarroe, and Melissa Walker. Day forwarded his list of potential recruits to Knowles. Although Knowles instructed Day to send the list to Hancock, Knowles conceded that he had regular meetings with Hancock and Day as part of "identifying candidates to fill the needs that [HWC] would have in [its] inspection group." Id., Vol. VI at 10. Hancock relied on Day's list of potential employees "as a point of reference when I was trying to fill needs on our inspection staff." Id., Vol. VI at 162. Furthermore, Knowles also maintained two working lists of potential recruits, which included ASI employees. Knowles forwarded these lists to Hancock, Day, and HWC's human resources director.

         [¶18] Day contacted numerous ASI employees to gauge their interest in an HWC employment opportunity and subsequently forwarded the applications of his former ASI colleagues to HWC management. As text messages reveal, Day kept Knowles apprised of his efforts in recruiting ASI (and other) employees, and Knowles commended Day for his leadership and success in filling their team. In one conversation regarding the issuance of offer letters, Knowles and Day laughed about hearing a rumor that ASI executives had to hold an "impromptu war room meeting" over staff retention concerns. Id., Vol. VII at 14.

         [¶19] On August 22, 2014, Day advised Knowles that Holth had submitted a resume to HWC, and a few days later, Day notified Knowles that "[n]o one has reached out to Holth yet." Id., Vol. VI at 232. Knowles instructed Day to remind Hancock "to touch base with [Holth]." Id., Vol. VI at 232. In March of 2015, HWC sent an offer letter to Holth; however, it appears that Holth elected to remain at ASI.

         [¶20] In the fall of 2014, Walker, an ASI construction inspector and utility coordinator, was working on a project with Mobley, at which time Mobley encouraged her to speak with Day. After nearly eight years with ASI, Walker had "grown unhappy"-believing that she had been "pigeon-holed in an administrative assistant role" despite her engineering degree. Id., Vol. IV at 10. Day advised her that she could submit a resume to HWC. On December 8, 2014, Walker emailed a copy of her resume to Day for him to forward to the appropriate individual at HWC. The following month, Hancock invited Walker for an interview and offered her a job with HWC. She accepted on March 9, 2015, and resigned from ASI on March 13, 2015.

         [¶21] Day, who had also been communicating with Mobley since his departure from ASI, informed Knowles on September 24, 2014, that Mobley "want[ed] out" at ASI. Id., Vol. VI at 235. At the end of 2014, Mobley submitted a resume to Day, which Day forwarded to Hancock. On February 11, 2015, HWC offered a job to Mobley, and Mobley accepted on February 21, 2015. At the time of his acceptance, Mobley did not have a definite start date with HWC, so he continued to work at ASI. During that time, Mobley engaged in discussions with other ASI employees about his own opportunity at HWC and encouraged others to submit their resumes.

         [¶22] Once Knowles left ASI, Lancet knew that it was time to "[p]olish [his] [resume] and hang on." Id., Vol. VI at 141. While Lancet was still at ASI, he conversed with other employees regarding their dissatisfaction with their ASI employment, and he forwarded a list of names to Day. Lancet eventually applied to HWC, and he met with Jolliffe in early 2015. On February 11, 2015, Lancet received an offer of employment from HWC, which he accepted on February 18, 2015.

         [¶23] In November of 2014, ASI employee Clinton Graham was at Day's house when Day informed him that HWC "was probably going to be hiring in the spring of 2015." Id., Vol. III at 233. The next month, Graham, a construction inspector, emailed his resume to Hancock via HWC's website. According to Graham, he wanted better wages than ASI paid, he felt neglected by ASI, and ASI was "losing its family feel." Id., Vol. III at 234. Hancock offered a position to Graham in January of 2015, which Graham accepted on March 2, 2015. However, at the time Graham accepted the job, no position was technically available at HWC, so he did not immediately resign from ASI.

         [¶24] In February of 2015, while still working at ASI, Mobley contacted one of his ASI colleagues, Conarroe, to see whether Conarroe would have any interest in applying to HWC. Mobley indicated that at least four other ASI employees were ready to jump ship to HWC. The next day, Conarroe alerted his supervisor at ASI to the fact that Mobley was attempting to recruit ASI employees for HWC. This, in addition to the suspicions that were raised when Tolle's HWC application was misdirected to an ASI email address, prompted an investigation by ASI. On March 3, 2015, ASI executives and attorneys interviewed Mobley and Lancet regarding their reported recruitment activities. During his interview, Mobley stated that Day had requested a list of potential ASI employees, and although he did not provide such a list to Day, he did talk to several employees and advised them that they could contact Day directly about job opportunities. Mobley identified Lancet as the ringleader in recruiting activities. Mobley also informed ASI executives that Lancet, Walker, Holth, Graham, and Tolle had all been offered positions with HWC. Lancet admitted during his interview that he had provided a list of potential employees to Day and had also had conversations with other ASI employees regarding their general interest in joining HWC.

         [¶25] ASI executives and attorneys also summoned Tolle, who had not yet started at HWC, to a "very hostile" meeting, during which they "interrogat[ed]" her as to who had recruited her to HWC. Id., Vol. III at 107. Tolle denied that anyone had persuaded her to join HWC; rather, she stated that her decision to leave was based "primarily on the unhappiness I had experienced at ASI for a few years." Id., Vol. IV at 5. Similarly, on March 4, 2015, Walker, also still working at ASI, was subjected to an "investigation meeting." Id., Vol. III at 12. Walker indicated that she "chose to work for HWC because it was right for my career. I did not come to HWC just because people I knew had come to HWC." Id., Vol. IV at 12. Also in March of 2015, ASI executives interviewed Graham, who confirmed that he had discussed his move to HWC with both Day and Mobley; however, Graham stated that Day "did not cause me to leave ASI. My motivation in joining HWC was purely financial." Id., Vol. III at 234. On March 6, 2015, ASI terminated Mobley's and Lancet's employment.

         III. The Present Case

         [¶26] On March 6, 2015, ASI filed a complaint against the HWC Parties, alleging breach of contract by Knowles, Day, and Lancet; breach of the duty of loyalty by Lancet and Mobley; unfair competition against all defendants; civil conspiracy against all defendants; tortious interference with ASI's contractual relationships; tortious interference with ASI's business relationships; and unjust enrichment against all defendants. ASI sought a preliminary injunction in addition to damages.

         [¶27] On September 29 and 30 and October 1, 2015, the trial court held a hearing on ASI's motion for a preliminary injunction. On December 11, 2015, the trial court granted ASI's request for an injunction as to Knowles, Lancet, and Day. The trial court denied ASI's request for a preliminary injunction against Mobley.[2]

         [¶28] On March 8, 2016, the HWC Parties filed a Motion for Summary Judgment, a brief in support of their motion, and a designation of evidence in support of the motion pursuant to Indiana Trial Rule 56. The HWC Parties claimed that "there are no genuine issues of material fact with respect to ASI's claims" and requested summary judgment on all claims brought by ASI. Id., Vol. VII at 86. The HWC Parties later filed a designation of supplemental evidence to support their motion for summary judgment. On June 9, 2016, ASI filed a response in opposition to the HWC Parties' summary judgment motion, along with its designation of evidence. On June 23, 2016, the HWC Parties filed a reply brief in support of their summary judgment motion, along with additional designated evidence.

         [¶29] On July 7, 2016, the trial court held a hearing on the motion. During the hearing, ASI agreed to dismiss its claim regarding unjust enrichment as against all defendants. On September 13, 2016, the trial court issued its Order, denying in part and granting in part the HWC Parties' motion for summary judgment. The trial court determined that there were genuine issues of material fact as to whether Knowles, Day, and Lancet had breached their employment contracts and caused damages to ASI. However, the trial court granted summary judgment for the HWC Parties as to the issue of liquidated damages from any breach, finding that the remedies clauses contained in each of the Knowles, Day, and Lancet Agreements were unenforceable as a matter of law. The trial court denied the HWC Parties' motion for summary judgment on ASI's claim that Lancet breached his duty of loyalty but granted summary judgment as to Mobley. The trial court granted summary judgment to the HWC Parties on ASI's claim for unfair competition. The trial court denied the HWC Parties' claim for summary judgment on ASI's claim of civil conspiracy with respect to HWC, Knowles, Day, and Lancet, but granted summary judgment on this count as to Mobley. For ASI's claim that HWC had tortiously interfered with contractual relationships, the trial court denied the HWC Parties' motion for ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.