A15A1282. LYMAN et al. v. CELLCHEM INTERNATIONAL, LLC.
A15A1282
Court of Appeals of Georgia
November 19, 2015
December 14, 2015
779 SE2d 474
RAY, Judge.
In 2010, Cеllchem International, LLC, sued husband and wife Dale and Helen Lyman, both of whom had worked for Cellchem in various capacities, and also sued Tritec International, Inc., and Shekoy Chemicals US, Inc. (collectively “Appellants“) alleging, inter alia, claims for computer trespass and computer theft, breach of fiduciary duty, and tortious interference with business relations. In 2014, a jury awarded nearly $7.4 million to Cellchem, divided variously among the individual Appellants, which included punitive damages and attorney fees.
In the instant appeal, the Appellants argue that the trial cоurt erred in: (1) denying their motion for a directed verdict and new trial on Cellchem‘s claim for tortious interference with business relations; (2) denying Mr. Lyman and Shekoy‘s motion for a new trial on Cellchem‘s claims of computer theft and computer trespass; (3) denying the Appellants’ motion for a new trial on Cellchem‘s claim for punitive damages; (4) admitting certain Cellchem exhibits into evidence; and (5) precluding the Appellants from using Cellchem‘s federal tax returns at trial. For the reasons that follow, we reverse as to the tortious interference claim; affirm as to the claims of cоmputer theft and computer trespass; remand for a new trial as to punitive damages; reverse as to Exhibits 72 and 73 and affirm as to Exhibits 76 and 77; and reverse as to the issue of the federal tax returns.
In brief, this case turns on Cellchem‘s allegations that the Lymans and a Chinese company called Jiangsu Yoke Technology Company Limited (hereinafter “Yoke“), which is not a party to this litigation, worked in conjunction with other entities to create a competing business designed to destroy Cellchem.
Cellchem sells flame retardants for use in the rigid foam industry. One of those flame retardants is known as TCPP. Mr. Lyman sold TCPP on behalf of Cellchem from 2003 until December 2009. His relationship with Cellchem was not exclusive, as he also sold materials for another company.
About six months prior to Mr. Lyman‘s resignation from Cellchem, Shekoy Chemicals US, Inc. (“Shekoy“) was incorporated in the State of Georgia. Yoke created Shekoy to sell TCPP in the United States. Like Cellchem, Shekoy also is in the flame retardant business. Shekoy began selling TCPP in the United States in January 2010.
Mr. Lyman was an officer of Shekoy from its incorporation in May 2009, during the same time period when he also worked as Cellchem‘s sales agеnt. He introduced Yoke to Cellchem, and Yoke became one of Cellchem‘s TCPP suppliers. However, on December 8, 2009, Shekoy,
Helen Lyman was Cellchem‘s operations manager. She resigned from Cellchem in an e-mail dated November 28, 2009. Just prior to resigning, Mrs. Lyman ordered 33 isotanks of TCPP, totaling more than 1 million pounds of the product. One of the Cellchеm owners had directed her to order nine of those isotanks. Mrs. Lyman testified that she informed Cellchem about the rest of the orders, but when presented with a spreadsheet of TCPP orders, she acknowledged that those orders were not on it. Cellchem testified that it was unable to store and pay for the rest of the TCPP orders, which hampered its ability to place future orders.
After Mrs. Lyman resigned, Mr. Lyman returned her work laptop to Cellchem. Cellchem claimed that Mrs. Lyman‘s business e-mails, which it needed, had been deleted. Cellchem presented evidence that its confidential QuickBooks files had been copied using a thumb drive and computers that the Lymans owned.
After a trial, a jury returned a nearly $7.4 million verdict against the Appellants, divided as follows: (1) $100,000 against Mr. Lyman, Mrs. Lyman, and Shekoy on the computer trespass claim; (2) $100,000 against Mr. Lyman, Mrs. Lyman, and Shekoy on the computer theft claim; (3) $900,000 against Mr. Lyman, Mrs. Lyman, and Tritec for breach of fiduciary duty; (4) $900,000 against all Appellants for tortious interference with business relations; (5) $298,433.73 in attorney fees against all Appellants; and (6) $5.1 million against all Appellants for punitive damages. Only this latter punitive damages award was specifically aрportioned between the Appellants: 98 percent to Shekoy, 1 percent to Mr. Lyman, 0.5 percent to Mrs. Lyman, and 0.5 percent to Tritec.1
1. The Appellants first argue that the trial court erred in denying their motions for a directed verdict and new trial on Cellchem‘s claim of tortious interference with business relations. We agree.
“In reviewing the denial of a motion for a directed verdict ... or motion for new trial, this Court must affirm if there is any evidence to support the jury‘s verdict, and in making this determination, we must construe the evidence in the light most favorable to the prevailing party.” (Citations and punctuation omitted.) Ferman v. Bailey, 292 Ga. App. 288, 290 (2) (664 SE2d 285) (2008). Any evidentiary
To prevail on a claim of tortious interference with business relations, a plaintiff must prove the following elements: (1) improper action or wrongful conduct by the defendant without privilege; (2) the defendant acted purposely and with malice with the intent to injure; (3) the defendant induced a breach of a contractual obligation or caused a party or a third party to discontinue or fail to enter into an anticipated relationship with the plaintiff; and (4) the defendant‘s tortious conduct proximately caused damage to the plaintiff. Additionally, to be liable for interference with contractual or business relations, one must be a stranger to both the contract and the business relationship giving rise to and underpinning the contract. In other words, all parties to a comprehensive interwoven set of contracts are not liable for tortious interference with any of the contracts or business relationships.
(Punctuation and footnotes omitted.) OnBrand Media v. Codex Consulting, 301 Ga. App. 141, 150 (2) (f) (687 SE2d 168) (2009). A third рarty who would benefit from the business relationship, even if not an intended beneficiary, is not a stranger to that relationship. Atlanta Market Center Mgmt. Co. v. McLane, 269 Ga. 604, 609 (2) (503 SE2d 278) (1998).
In its complaint and amended complaint, Cellchem argued that Mr. Lyman, Mrs. Lyman, Tritec, and Shekoy “interfer[ed] with Cellchem‘s business relations with its suppliers, customers and prospective customers pursuant to
(b) Mrs. Lyman‘s interference with Cellchem‘s customers and suppliers. The Appellants contend, inter alia, that a tortious interference claim will not stand against Mrs. Lyman because she was not a stranger to the business relationships at issue. We agree.
Spicher, one of the joint venturers who owned Cellchem, testified that Mrs. Lyman came to work at Cellchem as operations manager. Her duties included independently placing product orders with suppliers thаt Cellchem was contractually obligated to pay for; having contact with and receiving orders from Cellchem customers who purchased TCPP from the company; and fulfilling those orders. Mrs. Lyman also testified that, “customers would call, I would get their orders . . . get them on a truck and get them to wherever the customer needed them.” She also testified that she handled purchase orders for Cellchem. Further, testimony showed that Mrs. Lyman was paid by the joint venturers, and that Cellchem reimbursed them for her salary.
[r]egardless of whether an employee is acting as an agent of his employer when engaging in the interference, he is not a stranger to the business relationship between his employer and the customers he personally services and thus cannot be held liable under a claim of tortious interference.
Id. at 296 (2) (a), citing Parks v. Multimedia Technologies, 239 Ga. App. 282, 291-292 (3) (f) (520 SE2d 517) (1999). Because of the interwoven relationship between Mrs. Lyman‘s duties and Cellchem‘s customers and suppliers, Atlanta Market Center, supra at 609-610 (2), there is no evidence to support the finding that Mrs. Lyman was a stranger in the business relationships alleged.
(c) Shekoy‘s interference with the relationship between Cellchem and its customers. Again, we begin by examining whether there is any evidence to support that Shekoy was a stranger to the relationship between Cellchem and its customers. Cellchem‘s appellate briefs present us with no argument on this point as it relates to Shekoy.4
As already established, Mr. Lyman is Shekoy‘s general manager and is not a stranger to the relationship between Cellchem, which also employed him, and Cellchem‘s customers. Yoke, the producer from which Cellchem bought TCPP during the time period relevant to this case, owns the company that owns Shekoy. Yoke obviously had a financial interest in Cellchem‘s customers buying the TCPP it sold to Cellchem, so Yoke cannot have been a stranger to the relationship between Cellchem and its customers. Further, Mr. Lyman executed an agreement between Shekoy, Yоke, and his own company, Tritec, to form a TCPP sales/distribution company in the United States, clearly establishing that Yoke and Shekoy had a mutual financial interest in TCPP sales. “Where a defendant has a financial interest in one of the parties to the contract or in the contract [or business relationship], the defendant is not a stranger to the contract or business relationship, even though it is not a signatory to the contract.” (Citation
Defined more specifically, the issue before us encompasses the question of whether Shekoy, as a subsidiary of parent-company Yoke (which, as noted above, is not a stranger to the relationship between Cellchem and Cellchem‘s customers), can itself be a stranger to the relationship between those entities. This Court in the past contemplated that, under some circumstances, a parent corporation might be a stranger to its subsidiary‘s business relations such that a claim against the parent for tortious interference could lie. See SunAmerica Financial v. 260 Peachtree St., Inc., 202 Ga. App. 790, 797-798 (3) (b) (415 SE2d 677) (1992). However, since that time, our Supreme Court in Atlanta Market Center, supra at 609-610 (2), specifically disapproved of SunAmerica on this point, finding that “all parties to an interwoven contractual arrangement [or business relationship] are not liable for tortious interference with any of the contracts or business relationships.” (Citation omitted; emphasis supplied.) Id. at 610 (2). Or, as stated plainly in In re Hercules Automotive Products, 245 BR 903, 910 (I) (Bankr. M.D. Ga. 1999), “[i]t follows from the holding in Atlanta Market Center that as a matter of law, a parent corporation cannot be a stranger to its subsidiaries’ business or contractual relations, and that no claim can be sustained against a parent for tortious interference with such relations.” Here, while Shekoy occupies the role of subsidiary and not parent, we are persuaded that the interwoven web of business arrangements likewise applies in this context and that Shekoy, as a subsidiary, cannot be a stranger to its parent Yoke‘s business relations, which included the relationship between Cellchem and its customers. Therefore, Shekoy, through its parent, had a business relationship with Cellchem and its customers and is not a stranger to that relationship. Perry v. Unum Life Ins. Co. of America, 353 FSupp.2d 1237, 1240-1241 (III) (B) (N.D. Ga. 2005) (recognizing the Supreme Court of Georgia‘s endorsement, in Atlanta Market Center, of a line of cases reducing the number of entities against which a claim of tortious interference with business relations may lie and, in that context, In re Hercules and its finding that Atlanta Market Center fоund that a parent corporation cannot be a stranger to its subsidiaries’ business or contractual relations).
While it is clear that the Appellants were not blameless in their machinations involving Cellchem, as evidenced, inter alia, by the unappealed breach of fiduciary duty verdict, Cellchem has failed to point us to any evidence that supports all of the required elements of tortious interference, as required, and we must reverse as to all Appellants.
2. The Appellants next argue that the trial court erred in denying their motion for new trial as to the verdicts finding computer theft (
Cellchem argued, inter alia, that Mr. Lyman deleted backup files and copied computer files, including a QuickBooks file containing confidential financial data from a laptop provided to Mrs. Lyman during her employment. At trial, James Persinger, a cybercrime computer forensic specialist and former police officer, testified as an expert witness that he examined four computers belonging, variously, to Mr. and Mrs. Lyman, as well as two thumb drives that Mr. Lyman produced for the litigation and that he owned. Persinger testified that his forensic examinatiоn of the computers showed that a different thumb drive, which the Lymans had failed to produce despite a court order,7 had been inserted into one of the computers (identified as the Cellchem Sony) and Cellchem‘s QuickBooks files had been copied onto it. He determined the QuickBooks files had been accessed and backed up, among other things, on the Cellchem Sony on November 27, 2009, and that the Cellchem Sony was last used on November 28 and 29, 2009. Persinger also found that Mr. Lyman‘s thumb drives had been inserted into both the Cellchem Sony and another computer, called the Shеkoy PC, on November 29, 2009, and that three computers, identified as the Shekoy PC; the Cellchem Sony, which Mrs. Lyman used for her work at Cellchem; and the Lyman Gateway “were all sharing the same thumb drive at the same
Mr. Lyman alleges on appeal that “he was in Pennsylvania when the purported computer crimes took place[,]” but the record shows that although he testified that he was in Pennsylvania on November 27, 2009, he also stated that he returned to Georgia on November 28, and was there on November 29, 2009. On December 1, 2009, Mr. Lyman had a dinner meeting with a Shekoy representative and with representatives from another company. That other company is among the clients that Cellchem‘s president testified he lost to Shekoy. On December 8, 2009, Mr. Lyman executed an agreement between Shekoy, Yoke, and his own company, Tritec, regarding the establishment of a TCPP sales/distribution business in the United States which Tritec would manage.
. . . uses a computer or computer network with knowledge that such use is without authority and with the intention of: (1) Taking or appropriating any property of another, whether or not with the intention of depriving the owner of possession; (2) Obtaining property by any deceitful means or artful practice; or (3) Converting property to such person‘s use in violation of an agreement or other known legal obligation to make a specified application or disposition of such property[.]
uses a computer or computer network with knowledge that such use is without authority and with the intention of: (1) Deleting or in any way removing, either temporarily or permanently, any computer program or data from a computer or computer network; (2) Obstructing, interrupting, or in any way interfering with the use of a computer program or data; or (3) Altering, damaging, or in any way causing the malfunction of a computer, computer network, or computer program[.]
Although Mr. Lyman testified that he only used the Cellchem laptop for e-mail, the evidence from the computer expert, as outlined abоve, as to the insertion of thumb drives and copying/backup of QuickBooks files, while circumstantial, is more than enough to satisfy the required “any evidence” standard of review, Ferman, supra, and to affirm the verdict as to Mr. Lyman. Further, given the proximity of the file copying, Mr. Lyman‘s business trip with the Shekoy representative and subsequent agreement between them, we cannot say the trial court lacked any evidence to support the verdict against Shekoy. See Clarence L. Martin, P.C. v. Chatham County Tax Commissioner, 258 Ga. App. 349, 350 (574 SE2d 407) (2002) (a corporate entity has imputed knowledge of matters within the knowledge of its officer when that knowledge is within the scope of the officer‘s duties).
3. The Appellants next argue that the trial court erred in admitting over their objections certain financial spreadsheets that Cellchem tendered to prove its damages. These spreadsheets were marked as Exhibits 72, 73, 76, and 77.
We review for abuse of discretion a trial court‘s decision as to whether a proper foundation was laid for a document‘s admission as a business record. Roberts v. Community & Southern Bank, 331 Ga. App. 364, 369 (2) (771 SE2d 68) (2015).
At trial, the Appellants objected to Exhibits 72 and 73, which are expense reports, as summaries prepared for trial rather than in the regular course of business. They objected to Exhibits 76 and 77, which are sales reports, as being summaries of underlying documents that never were made available to the court or the Appellants. In both instances, Cellchem countered with testimony from Steven Gabelman, the vice president of Cellchem, that the exhibits were business records, created at or near the time the events occurred with information from someone with personal knowledge and a business duty to report, and kept in the regular course and practice of Cellchem‘s business.
Unless the source of information or the method or circumstances of preparation indicate lack of trustworthiness . . . , a memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, if (A) made at or near the time of the described acts, events, conditions, opinions, or diagnoses; (B) made by, or from information transmitted by, a person with personal knowledge and a business duty to report; (C) kept in the course of a regularly conducted business activity; and (D) it was the regular practice of that business activity to make the memorandum, report, record, or data compilation, all as shown by the testimony of the custodian or other qualified witness[.]
(a) Exhibits 72 and 73. However, Gabelman also testified that in order to show cost divisions between TCPP and other products, Exhibits 72 and 73 were specially prepared for trial. He testified:
We had a special document made. We don‘t, in our regular business records, divide a lot of those costs. And we try to make it, not simpler, but more pertinent to the trial by pulling out the TCPP from the other things that we sell, and, therefore, trying to make it more user-friendly for the [c]ourt.
It is well settled that documents prepared for litigation are not “compiled as a matter of regular practice” for purposes of
(b) Exhibits 76 and 77. As noted above, the Appellants objected to the admission of the sales report exhibits, contending that they were summaries and that the source documеnts underlying them had not been made available for evaluation.
First, no evidence was presented that the underlying documents were so voluminous that summaries were required. See
4. The Appellants argue the trial court erred in denying their motion for new trial on the issue of punitive damages. We agree.
While the jury apportioned the $5.1 million in punitive damages among the Appellants (98 percent to Shekoy, 1 percent to Mr. Lyman, and 0.5 percent each to Mrs. Lyman and Tritec), the verdict form did not delineate to which claims the damages were assigned, or in what proportion. Given our decision reversing the trial court in Division 1, those claims cannot provide the basis for any punitive damages award. See Wolff v. Middlebrooks, 256 Ga. App. 268, 271 (3) (568 SE2d 88) (2002) (finding that when appellate court cannot determine upon what basis the jury rendered its verdict on a general verdict form, it also cannot determine the underlying tort theory upon which the jury based its award for punitive damages, and because jury may have
“Unfortunately, the verdict form in this case merely states that punitive damages should be awarded to [Cellchem] . . . but does not allow us to determine the underlying theory upon whiсh the jury based its award. Accordingly, the award for punitive damages must be reversed[.]” (Footnote omitted.) Southland Propane v. McWhorter, 312 Ga. App. 812, 821 (4) (720 SE2d 270) (2011). We remand this case for a new trial on punitive damages.
5. The Appellants also argue that the trial court erred in preventing them from obtaining Cellchem‘s federal tax returns. We agree.
The Appellants contended at trial that they requested the tax documents via a notice to produce and that Cellchem had not provided them. The trial court initially stated that the tax records were “relevant” and “should be produced.” Later, however, Cellchem argued that the service date on the notice indicated thаt it was issued outside the discovery period, and the Appellants countered that a notice to produce is “under the evidence subpoena code, not under the discovery statute.” The trial court then stated that it would “reverse” itself, even though it still found the tax records “relevant,” because “it‘s too late to get them; discovery is over.”
Pursuant to
Judgment affirmed in part and reversed in part, and case remanded. Barnes, P. J., concurs. McMillian, J., concurs fully in Divisions 1, 2, 3 and 5 and concurs in judgment only in Division 4.
DECIDED NOVEMBER 19, 2015 —
RECONSIDERATION DENIED DECEMBER 14, 2015 —
Richard A. Gordon; Troutman Sanders, Stephen W. Riddell, Gary D. Knopf, Patrick J. Schwedler, for appellants.
Maner, Crumly & Chambliss, Jonathan D. Crumly, Sr., J. William Fawcett, for appellee.
