Hinely v. Alliance Metals
| Decision Date | 13 April 2007 |
| Docket Number | No. A06A2466.,A06A2466. |
| Citation | 645 S.E.2d 584,285 Ga. App. 230 |
| Parties | HINELY v. ALLIANCE METALS, INC. OF ATLANTA et al. |
| Court | Georgia Court of Appeals |
Richard N. Hubert, David P. Thatcher, Chamberlain, Hrdlicka, White, Williams & Martin, Atlanta, for appellant.
William B. Hill, Jr., Littler Mendelson, John T. Stembridge, Jenna Sunderland-Barres, Ashe, Rafuse & Hill, Atlanta, for appellees.
Robert F. Hinely, Jr. sued his former employer for breach of an employment contract and related torts. The State Court of Fulton County granted summary judgment to the former employer on the ground that Hinely's claims had already been litigated in a prior federal court action. We hold that the federal action did not preclude Hinely's claims in this case and that summary judgment was improperly granted on some of them. Accordingly, we affirm in part and reverse in part.
When reviewing a grant of summary judgment,
this Court conducts a de novo review of the law and the evidence. . . . When ruling on a motion for summary judgment, the opposing party should be given the benefit of all reasonable doubt, and the court should construe the evidence and all inferences and conclusions therefrom most favorably toward the party opposing the motion.1
The record shows that Hinely founded Hinely Aluminum, Inc., a business that distributed painted aluminum sheets, in 1988. Six years later, he sold the business to its main supplier, Alliance Metals, Inc., which was wholly owned by Bradley Evans. A separate company, Alliance Metals, Inc. of Atlanta ("Alliance Atlanta"), was formed to purchase Hinely Aluminum's assets. As part of the deal, Hinely entered into a five-year employment contract with Alliance Atlanta to serve as its president.
The contract provided that Hinely would earn a base salary, plus incentive compensation based on a percentage of Alliance Atlanta's net sales. If Hinely became dissatisfied with the incentive compensation calculation, he could request relevant data from Alliance Atlanta, and any disputes over the calculation would be referred to a "Big Six" accounting firm. The contract also contained a noncompetition and nonsolicitation clause limiting Hinely's ability to engage in a competing venture within two years of the termination of the employment contract.
The parties' relationship soon soured. In January 1995, Hinely was told that he would not receive any incentive compensation for the previous year. Believing that Alliance Atlanta must have manipulated the relevant data, Hinely requested information so that he could determine whether his incentive compensation had been correctly calculated. According to Hinely, however, Alliance Atlanta never provided the information.
In February 1995, Hinely began to suspect that Evans was engaging in an illegal price fixing scheme with a competitor. He reported his suspicions to the Department of Justice, which launched an investigation that eventually resulted in Evans pleading guilty to criminal antitrust violations.
In October 1995, Hinely wrote Evans a letter complaining that Evans and the Alliance companies had constructively discharged him, effective immediately, by breaching the employment contract in various ways. Shortly thereafter, Hinely formed a new aluminum business, Hinely Industries, Inc., that competed with Alliance Atlanta.
In December 1995, Hinely brought this action in the State Court of Fulton County against Alliance Atlanta, Alliance Metals, and Evans (collectively, the Alliance entities). The complaint alleged that the Alliance entities had breached the employment contract by (1) failing to give Hinely adequate information to verify Alliance Atlanta's calculation of his incentive compensation, (2) failing to pay the proper amount of incentive compensation, (3) drastically cutting back his responsibilities as president, (4) rendering impossible his performance of his employment obligations without participating in the price-fixing scheme, and (5) depriving him of the benefit of his bargain by establishing an illegal enterprise. The complaint also alleged that the defendants had fraudulently induced Hinely to enter the employment contract, tortiously interfered with the contract, and breached the implied covenant of good faith and fair dealing.
In February 1996, Alliance Atlanta sued Hinely and Hinely Industries in the United States District Court for the Northern District of Georgia, alleging trademark infringement and breach of the noncompete clause in the employment contract.2 The state court case was stayed pending resolution of the federal case. The federal district court awarded judgment to Alliance Atlanta, ruling that by opening his new business, Hinely had breached the noncompete clause and infringed Alliance Atlanta's right to the trade name "Hinely Aluminum."3 The United States Court of Appeals for the Eleventh Circuit affirmed.4
When the federal litigation ended, the state court granted summary judgment to the Alliance entities on all claims in this case. It held that the prior final judgment in the federal action collaterally estopped Hinely from re-litigating his claims in state court. It also held that Hinely had waived his claims regarding incentive compensation by not following the grievance procedure set forth in the employment contract and that he had not provided any evidence to support his other claims.
1. Hinely argues that collateral estoppel does not apply because the federal courts did not actually decide whether Alliance Atlanta had breached the employment contract. We agree.
Collateral estoppel, or issue preclusion, precludes the re-litigation of an issue that was previously litigated and decided on the merits in another action between the same parties or their privies.5 "[C]ollateral estoppel does not require identity of the claim — so long as the issue was determined in the previous action and there is identity of the parties, that issue may not be re-litigated, even as part of a different claim."6 Collateral estoppel "only precludes those issues that were actually litigated and decided in the previous action, or that necessarily had to be decided in order for the previous judgment to have been rendered."7
In the federal case, Hinely admitted that he had contravened the noncompete clause in the employment contract, but argued that he was relieved of any obligations under that contract because the Alliance entities had breached it first, in the same ways Hinely alleged in the state court action.8 Hinely relied on a provision of the contract stating that the noncompete clause would be null and void if Alliance Atlanta materially breached the contract. With respect to the trademark infringement claim, Hinely argued that Alliance Atlanta could not enforce the rights it had acquired in the "Hinely Aluminum" trade name through the asset purchase agreement because it had materially breached the employment contract.
The federal district court rejected Hinely's arguments. In an order granting a preliminary injunction to Alliance Atlanta, the court ruled that the price-fixing scheme, while "deplorable," had not prevented the parties' performance of their mutual obligations and therefore had not constituted a material breach of the employment contract. Nor had the diminishment of Hinely's responsibilities as president breached the contract, according to the district court, because Hinely's salary and status continued to be the same and because the contract provided that his responsibilities were subject to Evans's direction. Finally, the court ruled that Alliance Atlanta had responded, "whether completely or not," to Hinely's requests for information about incentive compensation, yet Hinely had elected not to invoke his contractual remedy of binding arbitration by a major accounting firm. Thus, the district court ruled that Alliance Atlanta had not materially breached the employment contract.9 That order, however, was preliminary. Because collateral estoppel applies only to final rulings,10 the findings in the preliminary injunction order cannot preclude Hinely's claims here.
In a subsequent order awarding summary judgment to Alliance Atlanta, the district court again addressed Hinely's argument that Alliance Atlanta had breached the employment agreement. The court ruled:
Notwithstanding the fact that the court has already determined that [Alliance Atlanta's] actions do not constitute breaches of the employment agreement . . . Hinely himself has failed to comply with ¶ 10(D) of the agreement, which provides, in relevant part, that the noncompetition provision "shall be null and void . . . if (Alliance Atlanta) materially breaches the terms of this agreement and fails to cure any such breach within thirty (30) days after notice from (Hinely) specifying the breach and requiring it to be cured." It is undisputed that Hinely did not provide the requisite notice until October 2, 1995, the same day that he resigned. Hinely thus failed to take the action necessary to lift the restrictions of the noncompetition provisions and is therefore bound by its terms.11
But in an order denying Hinely's motion for reconsideration of the summary judgment order, the district court clarified that it had not actually determined that Alliance Atlanta had not breached the employment contract. Rather, the court stated, its grant of summary judgment rested on Hinely's undisputed failure to comply with the notice provision of the noncompete clause.12 Thus, the summary judgment order did not actually decide whether Alliance Atlanta had breached the employment contract.
Before the Eleventh Circuit, Hinely reiterated his argument that the noncompete clause in the employment contract was void because Alliance Atlanta had materially breached the contract first. The court ruled that Hinely had failed to give Alliance Atlanta notice and an opportunity to cure its alleged breaches, as required by...
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