Edmunds v. Delta Partners, L.L.C.

• Citation: 403 S.W.3d 812
• Decision Date: 09 January 2013
• Docket Number: No. M2012–00047–COA–R3–CV.,M2012–00047–COA–R3–CV.
• Parties: Robert Thomas EDMUNDS v. DELTA PARTNERS, L.L.C., et al.
• Court: Tennessee Court of Appeals

403 S.W.3d 812

Robert Thomas EDMUNDS

v.DELTA PARTNERS, L.L.C., et al.

No. M2012–00047–COA–R3–CV.

Court of Appeals of Tennessee, Middle Section, at Nashville.

Nov. 14, 2012 Session.

Dec. 18, 2012.

Petition to Rehearing Denied Jan. 9, 2013.

Application for Permission to Appeal

Denied by Supreme Court

May 9, 2013.

John B. Holt, Springfield, Tennessee, for the appellants, Delta Partners, L.L.C. and Michael Richard Garrison.

Richard L. Colbert and Courtney L. Wilbert, Franklin, Tennessee, for the appellee, Robert Thomas Edmunds.

OPINION

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which DAVID R. FARMER, J., joined, and HOLLY M. KIRBY, J., filed a concurring opinion.

J. STEVEN STAFFORD, J.

Appellant corporation appeals the trial court's rulings finding it liable for breach of contract damages, prejudgment interest, and damages pursuant to the Fair Labor Standards Act. Additionally, the corporation's president appeals the trial court's action in piercing the corporate veil to hold him personally liable for the contract damages. We reverse the trial court's finding with regard to veil piercing, but affirm the trial court in all other respects.

I. Background

Plaintiff/Appellee Robert Edmunds was offered employment by Defendant/Appellant Delta Partners, L.L.C. (“Delta”) in 2004. Delta's purpose was to perform “turnarounds” for manufacturing companies, helping the companies to cut costs and increase profitability. Upon accepting the offer of employment, Mr. Edmunds received several documents regarding his employment with Delta, including a non-disclosure agreement, and a non-compete covenant, to which he agreed. The documents further provided that:

In consideration of the performance of all services required by Delta [ ], the confidentiality provisions and covenant not-to-compete set forth herein, the Company [i.e. Delta] agrees to pay Employee[i.e. Mr. Edmunds] a salary outlined in the Employee Offer Letter. This initial salary and other benefits provided to Employee pursuant to the Offer Letter may, from time to time as agreed by Employee and Company, be modified.

The document further provided that “[e]mployment shall be terminable for cause, such cause being in the sole discretion of Delta....” Both Mr. Edmunds and Defendant/Appellant Michael Garrison, as President and CEO of Delta, signed the document. Mr. Edmunds' Employee Offer Letter stated that his starting salary would be $65,000.00. The document also stated that Delta was an at-will employer. From 2004 until sometime in 2006, Mr. Edmunds was paid his salary in biweekly installments of $2,500.00, totaling $65,000.00 per year.

Subsequent to Mr. Edmunds accepting the offer of employment with Delta, Mr. Garrison came to own 95% of Delta stock, with his wife owning the other 5%. In 2006, Delta experienced financial difficulties, and could no longer afford to pay employees. However, Mr. Edmunds stayed with the company “out of personal loyalty” to Mr. Garrison. In 2006, 2007 and 2008, Mr. Edmunds received sporadic payments from Delta. Ultimately, Mr. Edmunds left the company in October 2008 due to the lack of payments, and sought payment of the funds owed to him under the alleged employment contract for the prior three years.

When Delta refused to pay, on January 22, 2009, Mr. Edmunds filed this lawsuit in the Robertson County Circuit Court. A bench trial was held on September 19, 2011. Mr. Edmunds testified that, from 2004 until 2006, he was paid according to the terms of the Offer of Employment. According to Mr. Edmunds, from the time he was hired in 2004 until he left Delta in 2008, he reported to work five days a week for a total of forty (40) hours per week. Mr. Edmunds testified that, while at work, he performed clerical tasks, worked on computer issues and software programming, and took telephone calls from clients and other employees. Per Mr. Edmunds' testimony, these phone calls occurred throughout his time with Delta and involved clients and employees in Tennessee, as well as Alabama, Kentucky, Indiana, and other states. In addition, in order for the employees to be paid each month, Mr. Edmunds would use a computer program to input the data regarding their time and wages each month; the computer program would then create checks to be signed by Mr. Garrison and distributed to the employees. However, in 2006, Mr. Garrison informed Mr. Edmunds that the company was experiencing financial difficulties and work had “slowed dramatically.” Mr. Edmunds chose to remain with the company despite these difficulties and, according to his testimony, performed the same clerical and administrative tasks as before, including inputting the payroll information and answering phone calls from clients and employees in other states. Delta was unable to pay Mr. Edmunds his full salary in 2006, 2007, and 2008. From the evidence presented at trial, Mr. Edmunds was paid a total of $3,800.00 in 2006, $21,250.00 in 2007 and $42,500.00 in 2008. For much of 2008, Mr. Edmunds was receiving his usual $2,500.00 biweekly payment. However, due to more difficulties, these payments again stopped in the summer of 2008. When asked whether Mr. Garrison ever explained Delta's failure to pay Mr. Edmunds his prior salary, Mr. Edmunds admitted that Mr. Garrison may have later informed him that the company did not have enough funds to cover payroll. Mr. Edmunds testified, however, that at no time did Mr. Garrison terminate Mr. Edmunds' employment or inform Mr. Edmunds that he would only be paid contingenton Delta getting more work, nor did he suggest that Mr. Edmunds seek unemployment in early 2006. Instead, Mr. Edmunds testified that Mr. Garrison “told me he'd pay me when he could. He told me that he was going to pay me every penny he owed me, to trust him.” In addition, Mr. Edmunds testified that he and Mr. Garrison had even discussed the tax consequences of Mr. Edmunds receiving a considerable amount of back pay in a lump some, stating that sometime in 2007, after reassuring Mr. Edmunds that he would be paid the full amount he was allegedly owed, Mr. Garrison asked, “[D]o you want all of it at once or part of it? You have got to think about the taxes situation.” However, Mr. Edmunds never received any back pay for the amounts he was allegedly owed and, when payments again stopped in 2008, Mr. Edmunds left his employment with Delta and sought unemployment benefits, which Delta did not oppose.

Mr. Edmund's wife, Amy Edmunds, also testified that Mr. Garrison reassured both herself and her husband that Mr. Edmunds would be paid in full for his employment with Delta in 2006, 2007, and 2008. According to Mrs. Edmunds, she and her husband went into considerable debt as a result of Mr. Edmunds not being paid, despite her income as a teacher. The couple first used approximately $7,000.00 or $8,000.00 they had earmarked to be put into a 401K. Once that money was exhausted, the couple turned to a home equity loan. According to Mrs. Edmunds, the couple drew approximately $33,000.00 from the home equity line in 2006, at an interest rate of eight to nine percent, $25,000.00 in 2007, at an interest rate of seven to eight percent, $4,000.00 in 2008, at an interest rate of four to seven percent, and $14,000.00 in 2009, at an interest rate of 2.75 percent. According to Mr. Edmunds, all of the money drawn from the home equity line was used to pay basic living expenses. In addition, both their retirements were delayed due to Mr. Edmunds not receiving his full pay from 2006 to 2008.

Through Mrs. Edmunds' testimony several letters and emails were introduced in which Mrs. Edmunds requested that Mr. Garrison and Delta pay the money that was allegedly owed to Mr. Edmunds. The letters, which date as early as May 24, 2007, expressed frustration with Mr. Garrison's continued failure to pay Mr. Edmunds, as well as Mr. Garrison's assurances that “something should be happening soon.” One letter, however, stated that Mr. Edmunds would not look for another job because he believed that he would be unable to secure employment due to his age ¹ and that Mr. Edmunds became angry and refused to discuss Delta's problems and outlook with Mrs. Edmunds. Included in the emails were also responses to Mrs. Edmunds' emails from Mr. Garrison. In one of the emails, dated September 7, 2007, Mr. Garrison assured Mrs. Edmunds that work would pick up and that “things should get back on a regular basis quickly and then begin catching up some of the back pay.” In another response, dated August 21, 2008, Mr. Garrison assured Mrs. Edmunds that he had taken no salary or profit from the company, instead all income to the company had gone to pay operating expenses, payroll and taxes on the company's two field employees. Mr. Garrison also assured Mrs. Edmunds that Delta was “almost 100%” sure to get another client in the coming weeks. However, due to the current lack of money, Mr. Garrison offered “[one] alternative”—to “lay [Mr. Edmunds] off and he can draw unemployment until there is income to pay him with or he finds another job.” Mr. Garrison stated that he had spoken with Mr. Edmunds earlier in the week and offered to let him go back home and that he:

never insisted or even asked him to work without getting paid and never will. I have the deepest possible gratitude for him staying the course and do not go through [one] single day without thinking about the debt and debt of gratitude I have for him....

* * *

I fully intend to make everything right whenever I can. If [Mr. Edmunds] has to leave and find another job, I will do all I can to help him in any way I can and will not discourage him in any way. I never have. I have every intention of meeting my obligation to [Mr. Edmunds] whenever I can regardless.

Thus Mrs. Edmunds testified that she and her husband were always led to believe that Mr. Garrison would pay Mr. Edmunds back for his lost wages from 2006 to 2008.

Mr. Garrison denied that Mr. Edmunds was employed pursuant to...