540 S.W.3d 803
Ky. Ct. App.2017Background
- Cornerstone Industries sued former salesman Jeff Roby, Alph C. Kaufman, Inc. (ACK), and Louis Kaufman after Roby left Cornerstone and began selling for ACK using bid documents; Cornerstone alleged breach of a non-compete, trade-secret misappropriation, tortious interference, conversion, breach of fiduciary duty, and fraud.
- Cornerstone could not produce a signed copy of Roby’s alleged non-competition agreement; Cornerstone relied on testimony, company policy documents, and other signed non-competes to prove a lost written agreement and its terms.
- At a nine-day jury trial the jury found for Cornerstone on all counts and awarded damages, but returned internally inconsistent findings: the jury found a valid non-compete existed and was breached, yet also found fraud and fiduciary-breach claims premised on the nonexistence of that agreement.
- Appellants moved post-trial for judgment notwithstanding the verdict and other relief; the trial court denied those motions and entered final judgment. Appellants appealed.
- The Court of Appeals affirmed the jury’s findings that (a) sufficient evidence supported the existence, terms, and consideration for a lost written non-compete; (b) Cornerstone proved trade-secret misappropriation and tortious interference; but (c) vacated and remanded for new trial on all claims that depend on the existence/nonexistence of Roby’s non-compete because the jury’s verdicts were irreconcilably inconsistent.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence and terms of Roby’s non‑compete | Cornerstone: policy and witnesses show a written non‑compete existed and its terms can be inferred from standard forms | ACK/Kaufman: no signed agreement proved; statute of frauds and insufficiency of evidence | Court: evidence (policy memo, witness testimony, other signed forms) was sufficient to support a finding of a lost written non‑compete and its terms; statute of frauds not a bar when proving a lost writing under KRE 1004/1008 |
| Consideration for the non‑compete | Cornerstone: consideration existed either as employment or specialized training/skills acquired | ACK/Kaufman: lack of consideration renders any post‑employment covenant unenforceable (relying on Creech) | Court: either employment consideration or specialized skills/support under Creech sufficed; jury verdict on consideration affirmed |
| Inconsistent verdicts (contract vs. fraud/fiduciary claims) | Cornerstone: pled fraud/fiduciary claims alternatively if no valid non‑compete existed | ACK/Kaufman: jury’s finding that a non‑compete existed is inconsistent with verdicts entered on fraud/fiduciary counts dependent on nonexistence | Court: Verdicts were irreconcilably inconsistent (jury found both existence and nonexistence); vacated final judgment and remanded for retrial on claims dependent on the non‑compete; unaffected claims stand |
| Trade‑secret misappropriation and tortious interference (directed verdict challenge) | Cornerstone: bid templates, spreadsheet with formulas/pricing, and emails show secrets and misuse; steps taken to keep them secret | ACK/Kaufman: bid forms aren’t trade secrets or weren’t reasonably protected; no improper/intentional interference | Court: Sufficient evidence supported trade‑secret status (value, secrecy, protective efforts) and misappropriation; sufficient evidence supported intentional, unjustified interference; denied directed verdicts and affirmed these liabilities |
Key Cases Cited
- Ragland v. DiGiuro, 352 S.W.3d 908 (Ky. App. 2010) (questions of law reviewed de novo)
- Denzik v. Denzik, 197 S.W.3d 108 (Ky. 2006) (appellate review of jury verdict limited to trial court's denial of directed verdict)
- Toler v. Süd‑Chemie, Inc., 458 S.W.3d 276 (Ky. 2014) (standard for reviewing denial of directed verdict/clear‑error standard)
- Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (Ky. 2014) (analysis of consideration for post‑employment noncompetition covenants)
- Anderson's Ex'x v. Hockensmith, 322 S.W.2d 489 (Ky. 1959) (court must correct or order reconsideration when a verdict is ambiguous or defective)
- Fastenal Co. v. Crawford, 609 F.Supp.2d 650 (E.D. Ky. 2009) (trade‑secret status is a question of fact under the Uniform Trade Secrets Act)
- Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476 (Ky. 1991) (examples of significantly wrongful conduct supporting interference/fraud claims)