Bearoff v. Craton
350 Ga. App. 826
Ga. Ct. App.2019Background
- In 2009 Bearoff sold her interests in two companies (High Five and Shannon Video/Entice) to Susan Craton under a Redemption Agreement that included an 81‑month non‑compete (Dec. 16, 2009–Sept. 16, 2016) and security documents (promissory note, deed, security agreement, guaranty).
- The promissory note and other security documents were later amended (maturity extended to Jan. 1, 2020), but the non‑compete term was not amended.
- Cratons defaulted after bankruptcy; Bearoff foreclosed on collateral, formed JBear and JDream, and reopened the business as The Frisky Biscuit. Charles Craton (and Craton Entertainment) opened a competing store, The Love Library, inside the non‑compete area and used Entice’s social media and trade name in promotion.
- Plaintiffs sued for breach of the non‑compete, aiding and abetting, conversion (social media), misappropriation of trade name, UDTPA violation, and sought equitable extension of the non‑compete, damages, injunctions, fees, and punitive damages.
- Trial court: denied equitable extension (summary judgment on that claim), found for Plaintiffs on remaining claims, awarded nominal damages, $50,000 punitive damages, injunctive relief (bar use of Entice name), and refused to award fees without a post‑judgment fee hearing; appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court may equitably extend non‑compete until debt paid | Bearoff: parties intended non‑compete to run while payments outstanding; OCGA §13‑8‑57(d) supports extension | Craton: non‑compete term expired as written; no agreement to extend | Court: Affirmed summary judgment — courts will not judicially extend unambiguous non‑compete term; parties did not amend non‑compete when note maturity extended |
| Compensatory damages for lost profits | Bearoff: Love Library profits are best evidence of Frisky Biscuit losses | Craton: profits not dispositive; Plaintiffs failed to prove lost profits with specificity | Court: Affirmed denial — Plaintiffs failed to prove lost profits with reasonable certainty or track record; gross profits of defendant insufficient |
| Right to post‑judgment hearing on UDTPA attorney fees | Bearoff: statute contemplates court will award fees after determining prevailing party; fee amount is for court to decide post‑trial | Craton: failure to present fees at trial or include in pretrial order waives fees | Court: Vacated fee denial and remanded — UDTPA contemplates bifurcated process; trial court should hold post‑judgment hearing on fee entitlement/amount |
| Conversion of social media accounts (intangible collateral) | Plaintiffs: accounts were collateral under Security Agreement and were converted/used by defendants | Defendants: no demand/return refusal; res judicata from bankruptcy contempt order | Court: Affirmed conversion finding — security interest existed, foreclosure notice given, defendants retained/used accounts; contempt proceeding did not adjudicate civil conversion |
| Misappropriation of trade name (Entice) | Plaintiffs: foreclosed collateral included Entice trade name; defendants used it to promote competing store | Defendants: Bearoff never owned Shannon Video so cannot own trade name | Court: Affirmed — trade name is intangible collateral; foreclosure transferred rights; defendants misappropriated name |
| Excessiveness of $50,000 punitive damages | Defendants: punitive award disproportionate to nominal damages | Plaintiffs: conduct warranted deterrence/punishment | Court: Affirmed — punitive purpose permits awards not strictly tied to compensatory damages; no proof of bias; award not an abuse of discretion given knowing, repeated violations and misuse of collateral |
Key Cases Cited
- Elec. Data Sys. Corp. v. Heinemann, 268 Ga. 755 (Ga.) (court will not judicially toll or extend non‑compete term)
- Coffee Sys. of Atlanta v. Fox, 227 Ga. 602 (Ga.) (refusing to extend covenant term during litigation; courts should not rewrite contracts)
- Miller v. GGNSC Atlanta, 323 Ga. App. 114 (Ga. Ct. App.) (contract interpretation: ascertain parties’ intent from plain language)
- Time Warner Entm’t Co. v. Six Flags Over Ga., 254 Ga. App. 598 (Ga. Ct. App.) (review of punitive damages for abuse of discretion; comparison to compensatory damages)
- Hospital Auth. of Gwinnett County v. Jones, 261 Ga. 613 (Ga.) (punitive damages need not bear close relation to actual damages; punitive purpose)