Insight Technology, Inc. brought this action in the Superior Court of Gwinnett County against Darren Brewer, Patrick Hull, GetLoaded.com, LLC, and FreightCheck, LLC. Insight asserted claims against these parties for breach of fiduciary duty, misappropriation of trade secrets, misappropriation of corporate opportunities, and fraud. Insight alleged that Brewer, who was Insight’s president, and Hull secretly agreed to create FreightCheck to compete with Insight using Insight’s own computer software and business practices. The trial court granted the motions for summary judgment filed by Hull, GetLoaded, and FreightCheck on all claims. The trial court granted Brewer’s motion for summary judgment in part, reserving to the jury Insight’s claims for breach of fiduciary duty, appropriation of corporate opportunities, punitive damages, and attorney fees. Insight appeals, contending jury issues remain on all of its claims, with the exception of its claim against Hull and GetLoaded for appropriation of corporate opportunities. For the reasons explained below, we conclude questions of material fact remain on Insight’s claims against Hull, GetLoaded, and FreightCheck for procuring a breach of fiduciary duties, misappropriation of trade secrets, punitive damages, and attorney fees, and reverse the trial court’s judgment in part. We affirm the remainder of the trial court’s judgment.
“On appeal from the grant of summary judgment [the appellate court] conducts a de novo review of the evidence to determine whether there is a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.” (Citation and punctuation omitted.)
Munroe v. Universal Health Svcs.,
Viewed in the light most favorable to Insight, the record contains evidence of the following facts. In 1996, Gary Aliengena incorporated Insight in Delaware as an internet-based freight load matching service, or “load board.” Under the name NetTrans, Insight’s virtual load board allowed independent truckers or small trucking companies to search online for available hauling jobs that matched their equipment and availability. The load board derived its revenue from membership fees paid both by the trucking companies and by shipping brokers and others who posted specific hauling jobs on the website. Insight also derived revenue from paid advertising on its website. GetLoaded, which Hull formed in Virginia in 1999, operated a similar virtual load board and competed with Insight.
When Aliengena created Insight, he hired Brewer to be the director of marketing. Aliengena and Brewer executed an employment agreement which required Brewer to hold in confidence Insight’s trade secrets and confidential information. Despite the designated title in the employment agreement, however, Brewer was the president of Insight during his entire employment with the company. Brewer managed Insight’s operations from an office in Norcross.
In 1998, Aliengena decided to expand Insight’s business into freight factoring. First under the name Quick Pay, and later under the name FactorLoads, Insight paid truckers immediately on hauling invoices and then, as an assignee, collected payment from the payors, either shippers or freight brokers. Because these assignments were “without recourse,” Insight accepted the risk of nonpayment or slow payment. For this service, Insight charged truckers a percentage commission on the face amount of the invoices.
For Insight’s FactorLoads service, Brewer created a website, drafted forms, designed procedures, such as for evaluating the credit worthiness of particular shippers and brokers, and trained and
supervised employees. In 2000, Brewer caused Insight to buy a commercially available website design program called ColdFusion and then enhanced the program with features useful in the factoring
In late 1999 or 2000, Brewer met Hull, GetLoaded’s majority shareholder and “managing member.” By this time, Brewer was a 20 percent shareholder in Insight. Brewer tried, unsuccessfully, to persuade Hull to accept an ad for Insight’s FactorLoads service on the GetLoaded website. By late 2001, Brewer and Hull began to discuss starting a new internet factoring business together. Hull wanted to partner with Brewer because of Brewer’s experience programming in the freight factoring industry. Hull incorporated a new company, FreightCheck, LLC, in Virginia. Hull also created a new company, Maverick Holdings, LLC, as the sole shareholder. Brewer created a new limited liability company, Extranet Commerce, LLC, as the sole shareholder. Hull’s wholly owned company, Maverick, and Brewer’s wholly owned company, Extranet, then each became 50 percent shareholders in FreightCheck. Hull provided FreightCheck’s startup capital by borrowing $100,000 from GetLoaded and then lending that sum to FreightCheck. Declaring that GetLoaded was “financially interested” in FreightCheck, GetLoaded provided a guaranty of FreightCheck’s obligations to an industry lender. Hull also provided a personal guaranty on some of FreightCheck’s debts.
FreightCheck launched its website and began operating its factoring business, in competition with Insight, on June 1, 2002. By this time, factoring represented about 98 percent of Insight’s total revenue of $5.3 million. Brewer rented office space for FreightCheck in an office suite down the hall from Insight’s office so it would be convenient for him to visit FreightCheck’s office while still employed at Insight. In the month before FreightCheck became operational, Brewer paid Insight employee Patti Burroughs to train Jeannie Yu in using the Factor Plus software and to train Insight employee Kristina Gersema to use certain accounting software and procedures used in Insight’s factoring business. In April 2002, Brewer offered Gersema a job as president of FreightCheck to commence on June 1, subject to Hull’s approval. According to Gersema, Brewer told her that he and Hull wanted her to be president of FreightCheck so that Aliengena would not find out about Brewer’s connection to the company. Freight-Check also hired Yu. Gersema and Yu signed confidentiality agreements acknowledging that FreightCheck’s computer programs, methods, processes and formulas were trade secrets.
The day it launched its business, FreightCheck’s website used the customized software program Brewer developed while working for Insight, and the website was nearly identical to Insight’s Factor-Loads website. On its first day, FreightCheck’s website even contained testimonials from “satisfied customers” which were identical to testimonials already appearing on FactorLoads.com. Freight-Check also used the same rate structure, forms, and business methods and processes Brewer developed at Insight. The parties presented conflicting evidence regarding whether Aliengena gave Brewer permission to start a new freight factoring company and to use Insight’s forms, processes, methods, software and technology to compete with Insight.
Over the next 21 months, while Brewer continued working as Insight’s president and supervising its employees, he spent much of his time in the FreightCheck office, managing its operations and supervising its employees. Brewer informed Hull of almost every aspect of FreightCheck’s daily operations and sought Hull’s approval of decisions. In November 2003, Brewer filed for copyright protection of the customized application of ColdFusion under the name Factor-Plus. Immediately thereafter, Brewer on behalf of Extranet licensed the FactorPlus software both to Insight and to FreightCheck.
Aliengena, Insight’s majority shareholder, was unaware of Brewer’s relationship with Hull, his 50 percent ownership interest (through Extranet) in FreightCheck, or his role in FreightCheck’s operations. On several occasions, Brewer told Gersema, Burroughs and other Insight employees not to tell Aliengena about his involvement in FreightCheck. Aliengena also did not know that Brewer had obtained copyright protection
In early 2004, Aliengena and Brewer discussed Insight’s revenues, which were “flat.” Brewer urged Aliengena to sell Insight to GetLoaded. On February 6, 2004, Brewer, on behalf of Insight, and Hull, on behalf of GetLoaded, executed a bilateral nondisclosure agreement to give GetLoaded access to Insight’s confidential and proprietary information. Trade secrets were defined to include, inter alia, source code, programs, and software. Then, on or about February 25, 2004, Burroughs informedAliengena of Brewer’s involvement in FreightCheck. On March 5, 2004, Hull, on behalf of GetLoaded, issued a letter of intent to Insight, offering to buy the company for $900,000, estimated to be 4.5 times earnings. Both Brewer and Hull actively concealed their ownership and participation in Freight-Check, and FreightCheck’s relationship to GetLoaded. Having learned of these relationships from Burroughs, however, Aliengena fired Brewer, and Insight filed this lawsuit on March 17, 2004.
After a hearing, the trial court denied Brewer’s motion for summary judgment on Insight’s claims for breach of fiduciary duty, appropriation of corporate opportunities, punitive damages, and attorney fees. The trial court granted Brewer’s motion for summary judgment on Insight’s claims for misappropriation of trade secrets, fraud, and conspiracy to breach fiduciary duty. The trial court granted the remaining appellees’ motions for summary judgment on these claims as well as Insight’s claims for aiding and abetting breach of fiduciary duty, appropriation of corporate opportunities, punitive damages, and attorney fees. 1 With the exception of the grant of summary judgment in favor of Hull and GetLoaded on Insight’s claim for appropriation of corporate opportunities, Insight appeals as to each of these claims and defendants.
1. Insight contends that Georgia law recognizes a claim for aiding and abetting a breach of fiduciary duty. Insight further contends that questions of material fact remain on its claim against Hull, Get-Loaded, and FreightCheck for aiding and abetting a breach of fiduciary duty, and, therefore, the trial court erred in granting the motion for summary judgment filed by Hull, GetLoaded, and FreightCheck on Count 1 of the complaint.
(a) The trial court concluded that Georgia has never recognized a claim for aiding and abetting a breach of fiduciary duty, citing
Monroe v. Bd. of Regents &c. of Ga.,
Furthermore, we are mindful that there is “no magic in mere nomenclature” in the designation of causes of action.
Guth v. Walker,
More to the point, we have explicitly acknowledged a cause of action for procuring a breach of fiduciary duty based on OCGA § 51-12-30. In
Rome Indus. v. Jonsson,
(b) Turning to the issue of whether Insight has identified specific evidence giving rise to a triable issue,
14
we conclude that Insight adduced evidence from which a jury could infer that Hull, acting as an agent of both GetLoaded and FreightCheck, tortiously procured Brewer’s breach of his fiduciary duty, damaging Insight. Accordingly, we reverse the trial court’s order to the extent that it granted summary judgment in favor of Hull, GetLoaded, and FreightCheck on Count 1 of the complaint.
Rome Indus. v. Jonsson,
2. Insight contends that Georgia law recognizes a claim for conspiracy to breach a fiduciary duty and that questions of material fact remain on Count 11 of the amended complaint alleging such a claim against Brewer, Hull, GetLoaded, and FreightCheck. We agree that Georgia law does recognize such a claim. See
Luke v. DuPree,
3. Insight contends questions of material fact remain regarding whether the FactorPlus software Brewer developed for Insight constituted a trade secret under Georgia law. As a result, Insight contends, the trial court erred in granting the appellees’ motions for summary judgment on Count 2 of the complaint, misappropriation of
trade secrets. The Georgia Trade Secrets Act of 1990, OCGA § 10-1-760 et seq., authorizes recovery of damages for misappropriation of information “which is not commonly known by or available to the public,” which “[d]erives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use,” and which “[i]s the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” OCGA §§ 10-1-761 (4) (A), (B); 10-1-763. “Whether a particular type of information constitutes a trade secret is a question of fact.” (Citations omitted.)
Camp Creek Hospitality Inns v. Sheraton Franchise Corp.,
4. Insight contends Brewer acted as FreightCheck’s agent when he “breached his fiduciary duties to [Insight] by, among other things, misappropriating the corporate opportunity that was [Freight-Check].” As a result, Insight contends, the trial court erred in granting FreightCheck’s motion for summary judgment on Count 4, citing
Smith v. Hawks,
5. Insight contends questions of material fact remain regarding whether the appellees committed fraud by “misrepresenting that [GetLoaded’s] proposed purchase of [Insight] was to be an arms-length transaction with a good faith purchaser and disinterested seller.” As a result, Insight contends, the trial court erred in granting the motion for summary judgment on Count 6 of the complaint.
The tort of fraud has five elements: a false representation by a defendant, scienter, intention to induce the plaintiff to act or refrain from acting, justifiable reliance by plaintiff, and damage to plaintiff. For an action for fraud to survive a motion for summary judgment, there must be some evidence from which a jury could find each element of the tort.
(Citation omitted.)
Tharp v. Vesta Holdings I, LLC,
It is undisputed that Aliengena learned about the circumstances of the creation of FreightCheck and the relationship
6. Insight contends questions of material fact remain regarding whether Hull, GetLoaded, and FreightCheck acted with malice such that Insight’s claims against them for punitive damages and attorney fees should be submitted to a jury. As to Count 8, Insight’s claim for punitive damages, “[p]unitive damages may be awarded only in such tort actions in which it is proven by clear and convincing evidence that the defendant’s actions showed willful misconduct, malice, fraud, wantonness, oppression, or that entire want of care which would raise the presumption of conscious indifference to consequences.” OCGA § 51-12-5.1 (b). As discussed in Division 1, supra, Insight adduced evidence from which a jury could find Hull, Get-Loaded, and FreightCheck liable for procuring a breach of fiduciary duty. Because acting purposefully, with malice and the intent to injure, is an essential element of this tort, it follows that Hull, GetLoaded, and FreightCheck are not entitled to judgment as a matter of law on Count 8. The trial court’s judgment in this regard is reversed.
As to Count 9, Insight’s claim for attorney fees pursuant to OCGA § 13-6-11, “[i]t is well established as the law of this state that every intentional tort invokes a species of bad faith and entitles a person so wronged to recover the expenses of litigation including attorney fees.
Moreover, bad faith is a question for the jury to be determined from consideration of the facts and circumstances in the case.” (Citations and punctuation omitted.)
Stargate Software Intl. v. Rumph,
Judgment affirmed in part and reversed in part.
Notes
The trial court also granted summary judgment on Insight’s claims for tortious interference with contract, unfair competition, and civil RICO; Insight did not appeal the trial court’s ruling on these issues.
Witty v. McNeal Agency, Inc.,
Wiliams v. Rio Grande Fence Co.,
Nottingham v. Wrigley,
Studdard v. Evans,
Arford v. Blalock,
Luke v. DuPree,
Joiner v. Lane,
Melton v. Helms,
See also
Nager v. Lad ’N Dad Slacks,
See also
Williams v. Svc. Corp. Intl.,
The word “procure” as... used [in OCGA§ 51-12-30], does not require the lending of assistance in the actual perpetration of the wrong done by another; but if one, acting only through advice, counsel, persuasion, or command, succeeds in procuring any person to commit an actionable wrong, the procurer becomes liable for the injury, either singly or jointly, with the actual perpetrator.
(Citations and punctuation omitted.)
Melton v. Helms,
As we have held,
[t]he act is malicious when the thing done is with the knowledge of plaintiffs rights, and with the intent to interfere therewith. The term “malicious” or “maliciously” means any unauthorized interference, or any interference without legal justification or excuse. Personal ill will or animosity is not essential. Persuading a person to break a contract for the indirect purpose of injuring the plaintiff or benefiting the defendant at the expense of the plaintiff is a malicious and actionable act if injury arises from it.
(Citations and punctuation omitted.)
Arford v. Blalock,
On summary judgment,
[a] defendant who will not bear the burden of proof at trial need only show an absence of evidence to support an essential element of the nonmoving party’s case. If the moving party discharges this burden, the nonmoving party cannot rest on its pleadings, but rather must point to specific evidence giving rise to a triable issue.
(Citations and punctuation omitted.)
Latson v. Boas,
