An employment agreement between Intermodal Cartage Company, Inc. (IMC) and four former employees—Tim Cherry, Dennis Etheridge, Charles Pate, and Gregory Zirock—contained non-solicitation and non-competition clauses. After leaving IMC to work for Delta Depot/Delta Express, LLC, a direct competitor, the company filed multiple allegations against them, including breach of contract and tortious interference. The trial court initially granted summary judgments favoring the employees and Delta. However, the Court of Appeals of Tennessee reversed this decision and remanded the case for further proceedings. The employment agreements required employees to devote full time to IMC, prohibited involvement in similar businesses without consent, and mandated compliance with company policies and relevant laws. IMC operates in the competitive containerized cargo transportation sector with locations in Memphis and Nashville, sharing several customers with Delta.
Employee acknowledges that IMC’s confidential and proprietary information, including customer data, pricing, business procedures, and patents, represents valuable assets whose unauthorized disclosure could cause irreparable harm to IMC. The Employee agrees not to use or disclose such information during or after employment and must return all IMC-related documents upon termination. Information publicly available is not deemed confidential.
For a period of one year post-employment, the Employee is prohibited from soliciting IMC’s current customers (defined as those who used IMC’s services in the year before termination) or prospective customers whom the Employee had solicited within that same timeframe. The Employee recognizes that these restrictions are necessary to protect IMC's business interests and will not impede their ability to find employment in their field.
Additionally, for one year after termination, the Employee agrees not to solicit IMC employees or contracted owner-operators to leave IMC. The document notes that several employees received raises for signing their agreements and subsequently resigned within a two-week period, with the details of these resignations being a central issue in the case. Appellant claims that one of the resigned employees, Cherry, had significant responsibilities involving customer relations, which included developing personal relationships with clients and having access to sensitive company information.
Etheridge was responsible for dispatching owner-operator drivers and maintained positive relationships with them while employed by Appellant. Pate, as dispatch supervisor, fostered goodwill with customers, and Zirock, a customer service representative, was involved in soliciting business and had knowledge of pricing and service methods. In July 2002, Lou Hazel, president of Delta, reached out to Appellant's employees, including Cherry, Etheridge, Pate, and Zirock, to discuss potential employment opportunities as Delta considered opening a terminal in Nashville. The employees faxed their Employment Agreements to Hazel and began holding secret meetings on Appellant’s premises during work hours. Cherry informed a coworker about job offers made to Zirock, Etheridge, and Pate.
On August 6, 2002, Cherry and Pate met with Hazel, after which all four employees resigned. Following their departure, they allegedly solicited Appellant’s major customers and drivers. Notably, Cherry and Pate visited Office Max before resigning, where they had established valuable relationships. Hazel subsequently approached Kenny Spevak from Office Max to persuade him to switch carriers to Delta, with Spevak acknowledging Pate’s familiarity with Office Max’s operations.
Delta held recruitment meetings where Cherry and Pate were present, and they encouraged Appellant's drivers, including Harold Hulsey, to join Delta. Consequently, several drivers who attended these meetings transitioned to Delta, which led to Office Max transferring its business from Appellant. Appellant claims that Delta, Etheridge, and Zirock continued to recruit its drivers and that Cherry attempted to disrupt Appellant’s relationship with another major customer, APL. Cherry allegedly over-booked APL’s capacity prior to his resignation, resulting in Appellant incurring storage costs, and Appellant was outbid by Delta for certain transportation work, with Cherry potentially misusing confidential business information.
Cherry informed Monique Gainer at APL of his new employment with Delta and expressed willingness to assist her. Cherry and Delta executive John Green hosted a golf outing for APL employees involved in business awards, which one attendee described as for customer relations. In late 2002, APL shifted significant business to Delta, resulting in Appellant losing its major Nashville account. Appellant claims damages due to this shift, including loss of large clients such as APL and Office Max, and the simultaneous resignations of key employees Cherry, Etheridge, Pate, and Zirock, which disrupted operations and led to the cancellation of other contracts. Appellant incurred expenses in hiring and training replacements to maintain business continuity and lost goodwill with customers.
Conversely, Delta argues that APL and Yang Ming had previously expressed interest in Delta opening a Nashville office due to dissatisfaction with Appellant's service. Delta maintains that APL suggested Hazel contact the four former Appellant employees regarding job opportunities, asserting that these employees did not discuss their new positions with one another. Delta claims Hazel's solicitation of Appellant’s drivers was at Spevak's request and that Cherry, Etheridge, Pate, and Zirock had minimal involvement in recruitment activities. They also assert that these individuals did not access Appellant’s confidential information and complied with their employment agreements prohibiting conduct that would violate those agreements.
Appellant filed a Verified Complaint against Cherry on September 5, 2002, later amending it to include Delta and the other employees. All defendants responded, and by November 2003, they filed Motions for Summary Judgment. The trial court granted Delta’s Motion for Summary Judgment on January 30, 2004, after reviewing the motion, undisputed material facts, and arguments.
Delta is found not to have caused or procured any breaches of contracts between Intermodal Cartage Company (IMC) and its employees or customers, nor did it interfere with IMC’s contractual or business relationships. IMC lacks a legitimate business interest that would justify enforcement of restrictive covenants in its employment agreements. Employees Cherry, Pate, Etheridge, and Zirock did not have access to confidential information while at IMC, nor did they possess a close enough relationship with IMC's customers to be considered the company's face. Cherry did not breach any enforceable contract provisions, and IMC did not suffer damages due to the actions of Pate, Etheridge, or Zirock in obtaining employment with Delta within the thirty-day period following their termination from IMC. Consequently, the court ruled in favor of Delta, granting its Motion for Summary Judgment against IMC's claims. Similarly, the court granted summary judgment for Cherry, confirming that IMC's restrictive covenants are unenforceable and that Cherry did not violate his contract. The orders for Etheridge, Pate, and Zirock were consistent with Cherry’s ruling, differing only in language regarding the absence of damages incurred by IMC from their employment with Delta.
Appellant raises multiple issues on appeal regarding the trial court's summary judgment rulings. Key points include: 1) the alleged error in dismissing Appellant’s claims against Appellees Cherry, Etheridge, Pate, and Zirock for breaching the Non-Solicitation of Employees clause in their Employment Agreements; 2) an alleged error in dismissing Appellant’s claim against Cherry for breach of the duty of loyalty; 3) the dismissal of claims against Cherry and Zirock for breaching Non-Competition provisions; 4) the dismissal of claims against Appellee Delta for unlawful inducement of breach of contract and tortious interference; and 5) the trial court's finding that Appellant did not prove damages as a result of Appellees’ actions. Appellee Delta contends the appeal is improperly before the Court due to Appellant's failure to timely file a Motion to Alter or Amend Judgment.
The standard for granting summary judgment under Tennessee law requires that there be no genuine issue of material fact, allowing the moving party to receive judgment as a matter of law. The trial court must view evidence favorably for the nonmoving party, and if any material fact is disputed, summary judgment must be denied. The appellate review of summary judgment is de novo, without any presumption of correctness.
In the analysis, Appellant claims that Cherry was instrumental in developing customer relationships and that these connections represent a protectable business interest. Appellees assert that Cherry did not embody the company’s representation and that Appellant lacks a legitimate interest that would warrant enforcing the Employment Agreement. The appeal references the principles discussed in Vantage Tech. LLC v. Cross, which addresses protectable business interests.
Vantage, an employer specializing in portable eye surgery machines, prioritized goodwill and encouraged technicians to build relationships with physicians by providing entertainment expense accounts and maintaining detailed records of physicians' preferences and personal information. Technician Cross left Vantage to work for a physician he had assisted, prompting Vantage to sue for enforcement of a non-competition agreement. A key legal consideration is whether Vantage has a legitimate business interest protectable by such a covenant. This requires demonstrating that special circumstances exist beyond ordinary competition that would grant Cross an unfair advantage if he were to compete. Factors include specialized training provided to the employee, access to confidential information, and the employee's established relationships with customers, which may lead customers to associate the employee with Vantage. The court emphasized that Cross's relationships with clients were developed through his role as Vantage's agent, making him privy to sensitive information. The ruling concluded that Vantage had a legitimate interest in preventing Cross from utilizing these relationships for personal gain, as failure to enforce the covenant would jeopardize Vantage's investment in customer relationships, while enforcement would only limit Cross's access to resources that were not rightfully his.
The trial court's conclusions regarding the Appellees and Appellant's claims may appear valid post-trial; however, the so-called 'undisputed facts' are actually contested, hinging on witness credibility, particularly those with vested interests in the case's outcome. Summary judgment is inappropriate for resolving disputed facts or related inferences. Justice Harbison noted that the Tennessee Rules of Civil Procedure, specifically Rule 56, established summary judgment as a means to efficiently resolve cases without factual disputes. If material factual disputes exist, the trial court must deny summary judgment motions rather than use them as substitutes for a full trial.
In this case, the Chancellor recognized a material dispute regarding the total destruction of a building but opted for a reference instead of denying the summary judgment motions. This approach deviated from the intended application of Rule 56, which aims to ensure clear issue development through standard trial processes. Overruling a summary judgment does not automatically present a jury question, as trial evidence may differ significantly from pre-trial submissions. The mere overruling indicates that further proceedings are necessary. The current matter is essentially a credibility contest among interested witnesses, whose uncontradicted testimony cannot justify summary judgment or directed verdicts, as their interest creates factual disputes.
The Court equates motions for summary judgment under Tenn. R.Civ. P. 56 with motions for directed verdicts, emphasizing that a directed verdict should not be granted if there is any doubt regarding evidence interpretation. Uncontradicted evidence does not automatically warrant a directed verdict or summary judgment, particularly when the credibility of the evidence has been challenged. Testimonies from several customers highlighted their relationships with former employees of Appellant, including Spevak from Office Max, who expressed distress over the sudden resignations of Cherry and Pate, and Gainer from APL, who confirmed a close friendship with Cherry developed during his employment. Mark George, Appellant's president and CEO, explained that customer loyalty and relationships foster goodwill that is crucial to business success, asserting that Cherry had established significant loyalty with key customers such as APL, Office Max, and Yang Ming Lines. George also indicated that other employees, including Pate and Zirock, had similar relationships with these customers. Furthermore, Cherry's responsibilities at Delta closely resemble those at Appellant, indicating his ongoing customer connections.
Cherry's relationships with Appellant's customers were established for Appellant's benefit, indicating that these connections did not rightfully belong to Cherry but were rather instrumental for Appellant in fostering goodwill. A significant issue raised by Appellant is that while still employed at Intermodal Cartage, Cherry met with Hazel in mid-July 2002, where they discussed Cherry's potential interest in joining Delta. During this meeting, Cherry mentioned having an employment contract and expressed interest in exploring opportunities at Delta. Following this lunch discussion, Cherry faxed his employment agreement to Hazel, who then consulted with Mr. Derrick regarding its validity before pursuing Cherry's potential employment further.
Hazel described his conversations with Cherry, indicating that the main hurdles to Cherry's transition to Delta were his hesitations about leaving Intermodal rather than financial considerations. Hazel did not engage in persuasive tactics to recruit Cherry, attributing Cherry's indecision to his dissatisfaction with his current work environment. Selena Hunt corroborated the timeline, stating that Cherry informed her about his upcoming meeting with Delta representatives between August 5 and August 8, 2002, which was shortly before Cherry's departure from Intermodal. Hunt noted that Cherry only contacted her once after leaving the company.
The individual interviewed confirms that the only communication with Tim since his departure was a prior conversation about job offers made by Tim to Dennis, Greg, and Charlie. The witness acknowledges that they did not participate in the closed-door meetings held before Tim's leaving but were aware of their occurrence. Tim informed the witness about the job offers before he left, although the specifics of the offers were not detailed during the meetings. The witness indicates Tim expressed intentions to propose job positions to the mentioned individuals and had a close relationship, discussing various topics, including his dissatisfaction with Intermodal and thoughts of leaving the company. Furthermore, there is acknowledgment of the interest of multiple witnesses in the case outcome, with Tim Cherry having a significant role as Regional Vice-President for Intermodal, frequently engaging with important customers and holding regular meetings with key personnel. The details surrounding the closed-door meetings and Tim's job proposals are presented as undisputed facts for the purposes of the Motion for Summary Judgment.
Tim Cherry allegedly made job offers to Dennis Etheridge, Charlie Pate, and Greg Zirock to join Delta, stating that Pate would be taken immediately while Etheridge and Zirock might join later due to Delta Express's nascent status. Selena Hunt disputed this, asserting that Cherry was not employed by Delta and that his comments were sarcastic. It is confirmed that closed-door meetings occurred between Cherry and the other individuals from July 22, 2002, until Cherry's departure from Intermodal on August 8, 2002. The case presents significant factual disputes regarding Cherry's employment status and the nature of the job offers, suggesting that summary judgment is inappropriate. Key issues include whether Cherry breached his duty of loyalty to Appellant and whether Delta induced breaches of Employment Agreements among Appellant’s employees. The trial court's judgment is reversed, and the case is remanded for further proceedings, with appeal costs assigned to Appellees.
