96-1693 La.App. 4 Cir. 4/23/97, HCNO Services, Inc. v. Secure Computing Systems, Inc.

• Decision Date: 23 April 1997
• Parties: 96-1693 La.App. 4 Cir
• Court: Court of Appeal of Louisiana — District of US

Page 835

693 So.2d 835

96-1693 La.App. 4 Cir. 4/23/97

HCNO SERVICES, INC. and Palm Tree Management Co., Inc. v. SECURE COMPUTING SYSTEMS, INC., Colorado Property Investors,

Inc. and Leo James Radosta.

Nos. 96-CA-1753, 96-C-1693.

Court of Appeal of Louisiana,

Fourth Circuit.

April 23, 1997.

Lawrence D. Wiedemann, Karl Wiedemann, Wiedemann & Wiedemann, New Orleans, for Plaintiffs/Appellants/Respondents.

C. Emmett Pugh, Rickey R. Hudson, National Law Offices of Pugh/Associates, Patent and Trademark Attorneys, New Orleans, for Defendants/Appellees/Relators.

Before LOBRANO, PLOTKIN and WALTZER, JJ.

[96-1693 La.App. 4 Cir. 2] LOBRANO, Judge.

The issues in this consolidated writ and appeal are whether the trial judge was clearly wrong in dissolving a previously issued preliminary injunction, awarding damages for its wrongful issuance and holding defendants-appellees in contempt for violating the injunction. ¹ The injunction at issue was obtained on March 16, 1995 and was dissolved on January 22, 1996. The contempt order was issued on February 7, 1996 and the damage award was rendered March 27, 1996. The facts and procedural history precipitating these judgments are as follows:

Colorado Property Investors, Inc. (CPI) was incorporated in 1980. Secure Computing Systems, Inc. (SCS) was incorporated in 1989. Leo James Radosta, a computer software developer, is the president and principal owner of both CPI and SCS. Sometime in late 1989, Radosta became acquainted with Hospice of Greater New Orleans (Hospice), and its chief executive officer, Jo Ann Mueller. Hospice is a non-profit corporation, unrelated to HCNO Services (HCNO). HCNO operates a staffing agency that trains and leases certified nursing [96-1693 La.App. 4 Cir. 3] assistants to Hospice and produces training videos for sale.

Hospice engaged Radosta to design a software program to fit its billing and administrative needs. Using Hospice as the initial "alpha" site, Radosta wrote a new program called "OASIS". The OASIS program was offered to the hospice industry in 1990 and eventually was copyrighted by Radosta in 1991. SCS was awarded the exclusive marketing rights to OASIS by CPI. SCS created a product logo, product literature, information packets, display booths and marketing plan. All sales were handled by SCS. By the end of 1993, SCS's total sales, including OASIS, reached $700,000.00. Nevertheless, Radosta needed an infusion of cash into the OASIS business and he began to look for an investor.

HCNO is owned by Jo Ann Mueller's children, Mark Mueller, Michael Mueller, Melissa Mueller and Melinda Mueller. The Mueller siblings met Radosta through their mother. By February, 1994, Mark Mueller was hired by SCS to sell the OASIS program. He accompanied Radosta to various sales demonstrations to learn the various sales techniques used by Radosta.

The parties agree that the Muellers did invest money in SCS and/or CPI through HCNO. However, the parties disagree as to the amount invested. Nevertheless, the Muellers and Radosta entered into some kind of business arrangement while negotiating towards a written agreement which supposedly would eventually give the Muellers a 50% ownership interest in SCS. In exchange for their ownership interest, the Muellers would infuse cash in SCS allowing it to expand its software business. Mark Mueller would manage the sales portion of the business in exchange for a commission override; Radosta would continue as president; and, Radosta and the SCS staff would continue to handle the technical support services. Negotiations continued without success.

On September 7, 1994, Radosta and Jo Ann Mueller met for lunch to discuss the Muellers' latest proposal which had been faxed to Radosta by Mark Mueller on September 5, 1994. From this point on the parties' rendition of what followed differs dramatically. ² We first present Radosta's version.

Radosta asserts that there was no meeting of the minds during the luncheon meeting as to a written agreement. Radosta claims that he roundly rejected the Mueller proposal for a number of reasons which he noted on the proposal. Among Radosta's most serious objections were the Muellers' proposals to place the OASIS source code in an escrow account and to form a new company to be referred to as "Secure Management Company" (SMC), the ownership of which was to be split 50-50 between SCS and HCNO. SMC was to be the management company for the OASIS business. ³

Radosta claims that all he agreed to and signed at the luncheon meeting with Jo Ann Mueller was a "document of simple intent" which listed common goals between the parties. This document consisted of two pages with the second page being the signature page. Radosta was not given a copy of this document. On September 8, 1994, the following day, Radosta asserts that he sent a two page fax to Jo Ann Mueller containing his suggestions for the proposed [96-1693 La.App. 4 Cir. 4] agreement. Negotiations continued without success.

On December 13, 1994, Radosta claims he met with Mark Mueller in a continuing effort to reach an agreement. It was at this meeting that Radosta claims that he first saw his signature on the signature page from the "document of simple intent" attached to the previously rejected Mueller proposal. Knowing the agreement was an absolute fake, Radosta claims he dismissed "it out of hand". No agreement was reached.

Following this meeting, Radosta states that Mark Mueller placed an unauthorized address change with the post office so that all SCS mail would be sent to Muellers' Metairie office, that Mueller illegally deposited $25,000.00 in checks made payable to SCS into an HCNO account, and that Mueller had SCS's telephones disconnected. This is when Radosta decided to sever ties with the Muellers.

On December 29, 1994, the parties met and, according to Radosta, it was decided that he would attempt to raise $95,000.00 to buy-out the Muellers and compensate them for the money they invested in SCS. The parties would then go their separate ways. Subsequent to this meeting, for whatever reason, a last effort was made to salvage the relationship between the parties.

Radosta met with Ed Morgan of Peachtree Hospice who expressed an interest in investing in SCS. Morgan was to acquire 22% of SCS, the Muellers and Radosta would each have 39%. Mark Mueller would be in charge of sales only. Radosta would continue to handle the support and technical end of the business. Morgan would hire the Administration Manager. CPI was to receive guaranteed, minimum annual royalties of $87,500.00 based on minimum OASIS [96-1693 La.App. 4 Cir. 5] sales of $350,000.00 at a 25% royalty rate, paid monthly and adjusted quarterly to reflect actual sales. CPI would also conduct upgrades on a fee-for-service basis and Radosta would additionally receive 39% of the net profits. Radosta was in agreement. A meeting to formalize the agreement was to be held on February 17, 1995. However, the letter of intent drafted by Mark Mueller differed significantly from the discussed proposal, and that deal fell apart. Radosta claims he made two subsequent attempts to resolve the matter. The last offer tendered by Radosta was on or about March 7, 1995.

The Muellers version of the facts following the September 7, 1994 luncheon meeting differ dramatically from that of Radosta.

The Muellers claim that following the meeting between Radosta and Jo Ann Mueller, an agreement was finalized. After the meeting both parties returned to Jo Ann Mueller's office where the details of the agreement were put on a computer disk in order to make necessary changes. Mark Mueller approved the deletion of the provision placing the OASIS source code in escrow. Radosta then signed the agreement as president of CPI and SCS. Jo Ann Mueller signed as a witness. The agreement provided that HCNO would form a joint venture management company to be called Secure Management Company (SMC), owned equally by SCS and HCNO. SMC would manage the OASIS business. The name "Secure Management Company", however, was never used because it was unavailable. Instead Palm Tree Management Company, Inc. (Palm Tree) was incorporated on November 29, 1994 as the new management company. In consideration for royalties to be paid to CPI, the agreement granted Palm Tree the exclusive right to sell all OASIS products, including the then current OASIS [96-1693 La.App. 4 Cir. 6] products, forms of OASIS produced by CPI and/or Radosta, new modules or features, and any product sold to any existing OASIS customer. The Muellers also claim the agreement required Palm Tree to provide customers with technical support, along with the cooperation of CPI whenever Palm Tree needed technical assistance. In exchange, CPI would receive 10% of the total amount collected in support income.

The Muellers claim that shortly after the agreement was finalized, Radosta actively began to thwart Palm Tree's efforts to manage the OASIS business by accepting the financial benefits (payments of SCS's operating expenses) via the agreement while refusing to transfer the management or assets to Palm Tree; by refusing to forward customer calls and correspondence to Palm Tree for technical support; by divesting payments from Palm Tree to SCS and CPI; and, by soliciting OASIS customers in violation of the exclusivity provision of the agreement.

On March 8, 1995, HCNO and Palm Tree filed a petition for a permanent injunction against SCS, CPI and Radosta alleging breach of contract, unfair trade practices, tortious interference with a contract, misrepresentation and detrimental reliance. HCNO and Palm Tree asserted that immediate, irreparable injury and loss would result to their interests in the OASIS business and requested a temporary restraining order (TRO) issue enjoining SCS, CPI and Radosta from continuing to manage the OASIS business. HCNO and Palm Tree requested preliminary and permanent injunctive relief. On that same date, a TRO was granted by...