Brown Jordan Int'l, Inc. v. Carmicle
| Decision Date | 01 March 2016 |
| Docket Number | CASE NO. 0:14-CV-61415-ROSENBERG/BRANNON,CASE NO. 0:14-CV-60629-ROSENBERG/BRANNON |
| Parties | BROWN JORDAN INTERNATIONAL, INC., et al., Plaintiffs, v. CHRISTOPHER CARMICLE, Defendant. CHRISTOPHER CARMICLE, Plaintiff, v. BJI HOLDINGS, LLC, et al., Defendants. |
| Court | U.S. District Court — Southern District of Florida |
This case requires the Court to determine whether certain actions taken by Christopher Carmicle ("Carmicle"), a high-ranking employee running two subsidiaries of an international furniture company, warranted termination for cause of his employment. In particular, the Court must determine whether Carmicle's repeated access of other employees' email accounts—including those of the parent company's Chief Executive Officer ("CEO"), Chief Financial Officer ("CFO"), and General Counsel—using a single generic password provided to all employees in connection with the transition to a new email service amounted to gross negligence or willful misconduct. At stake is a substantial amount of money in profits interests and severance pay to which Carmicle is entitled unless the Court determines that his employment was properly terminated for cause.
While the outcome of this case rests largely on that determination, the Court must also resolve various other factual and legal disputes stemming from Carmicle's conduct, both during the course of his employment and in connection with the litigation of this case. These include whether Carmicle violated federal law, including the Computer Fraud and Abuse Act and the Stored Communications Act, by accessing other employees' email accounts; whether Carmicle is liable to his former employer for the salary paid to Carmicle's wife and for various entertainment expenses incurred by Carmicle, including the cost of floor seats and private boxes at major collegiate athletic events and events at Churchill Downs,1 all of which were paid at Carmicle's direction from company funds and deliberately obscured in the budget during a sharp downturn in profits; whether Carmicle is liable to his former employer for the value of furniture he provided at no cost to his country club; whether Carmicle's employment was terminated in retaliation for exposing what Carmicle characterized as illegal and fraudulent activity committed in connection with a potential management buyout of the company; and whether Carmicle's intentional destruction of relevant evidence warrants imposition of sanctions against him.
Prior to consolidation, the parties raised their respective claims in two separate cases. In one, Brown Jordan International, Inc. ("BJI"), BJI Holdings, LLC, Brown Jordan Company ("BJC"), and Brown Jordan Services ("BJS") (collectively, the "Company") alleged violations of the Computer Fraud and Abuse Act and the Stored Communications Act, breach of fiduciary duty and the duty of loyalty, conversion, unjust enrichment, and breach of contract, and requested a declaratory judgment that Carmicle's actions warranted termination for cause of his employment. In the other, Carmicle alleged fraudulent misrepresentation and breach of contractby BJI Holdings, LLC, BJI, BJS, and the CEO, CFO, General Counsel, and members of the Board of Directors of BJI (collectively, the "Brown Jordan Parties").2 The Court consolidated the two cases for trial and all claims were tried before the Court in a bench trial from October 27, 2015 to October 30, 2015, from November 2, 2015 to November 6, 2015, and from November 9, 2015 to November 10, 2015.
The Court ultimately concludes that Carmicle's employment was properly terminated for cause, primarily due to his accessing other employees' email accounts, which the Court further concludes violated the Computer Fraud and Abuse Act and the Stored Communications Act. Carmicle is therefore not entitled to any profits interests or severance pay. While Carmicle also failed to comply with Company policies governing disclosure of conflicts of interest and approval of entertainment expenses, that failure does not render Carmicle liable to the Company for the salary paid to Carmicle's wife and the various entertainment expenses incurred by Carmicle. Likewise, Carmicle is not liable to the Company for the value of furniture he provided to his country club. The only damages to be recovered by either side are those awarded to the Company as a result of Carmicle's violations of the Computer Fraud and Abuse Act and the Stored Communications Act. In addition, the Court will impose sanctions in the form of adverse inferences drawn against Carmicle for his spoliation of evidence.
Based on the evidence presented at trial, the memoranda submitted, and oral argument of the parties, the Court makes the following findings of fact and conclusions of law:
I. INTRODUCTION
The Court first briefly summarizes the background facts and relevant procedural history of this case before detailing its specific findings of fact and conclusions of law.
Carmicle was born and raised in Louisville, Kentucky. After graduating from the University of Kentucky with a degree in civil engineering in 1997, Carmicle received an MBA from Bellarmine University in 2000. Two years later, while working for a venture capital fund in Louisville, Carmicle was contacted by Bruce Albertson, then-CEO of BJI. Shortly thereafter, Carmicle accepted a position with BJI as director of new business development and moved to Pompano Beach, Florida. Carmicle's wife, Rashna Carmicle ("Mrs. Carmicle" or "Rashna")3 joined BJI that same year as director of marketing.
Carmicle swiftly rose through the ranks at BJI, the parent company of a number of entities engaged in the manufacture and sale of furniture for both residential and commercial use. Only five or six months after joining BJI, Carmicle was promoted to vice president of sales. By 2005, Carmicle was the president of a BJI subsidiary that would eventually become BJS, and had relocated to Louisville with his wife. That year, Mrs. Carmicle left her full-time position with BJI and entered into an independent contractor agreement, pursuant to which she would continue to provide marketing services for the Company for up to two years, but would work fewer hours for reduced compensation.
Shortly after Carmicle became president of BJS, Gene Moriarty ("Moriarty") became CEO of BJI. At Moriarty's request, Carmicle entered into an Executive Employment Agreement with BJI, solidifying the terms of his employment. Carmicle subsequently entered into several Profits Interest Agreements, pursuant to which Carmicle acquired profits interests in BJI Holdings, LLC, subject to the Agreements' vesting and forfeiture provisions. Whether Carmicle is now entitled to severance pay and profits interests turns on whether his employment was properly terminated for cause as defined in those Agreements.
By all accounts, Carmicle was initially well-liked by Moriarty and the members of BJI's Board of Directors, who described him as personable, capable, and smart. In 2004, the year before Carmicle became president, BJS was on the verge of bankruptcy with negative earnings before interest, taxes, depreciation, and amortization ("EBITDA"). By 2007, EBITDA at BJS had risen to almost thirty million dollars. After a couple of good years, however, EBITDA dropped to under ten million dollars in 2011, and rose only slightly in 2012 and 2013.
Meanwhile, Moriarty and others were beginning to have doubts about Carmicle. The trouble started at the end of 2011, when it came to light that Mrs. Carmicle remained on the payroll and had received several raises in salary at Carmicle's direction and with Carmicle's sole approval, despite little evidence that Mrs. Carmicle continued to provide services to the Company, while profits were low and a number of full-time employees had been laid off. Although Carmicle immediately complied when Moriarty instructed him to cease all payments to Mrs. Carmicle, Moriarty considered the failure to disclose this conflict of interest so egregious that it provided cause to terminate Carmicle's employment. Instead, however, Moriarty gave Carmicle a stern warning and a second chance. Moriarty also gave Carmicle greater responsibility, making him president of BJC, another BJI subsidiary, in addition to BJS.
Around the same time, faint hints of Carmicle's excessive entertainment expenses began to appear. In an email to Moriarty, Carmicle requested authorization for a substantial expenditure on tickets to athletic events. After learning about the request from Moriarty, BJI's General Counsel was struck by how large the amount seemed compared to the amount approved in 2007, when profits were substantially higher than at the end of 2011. Nevertheless, no one sought additional information about Carmicle's actual entertainment expenses in previous years or Carmicle's requested budget for such expenses in the coming year. It was not until the end of2013, when BJI's CFO was reviewing BJS's past advertising expenses for an unrelated reason, that the full extent of Carmicle's unauthorized entertainment expenses was recognized.
Everything began to unravel for Carmicle in 2013. That year, Moriarty learned that Carmicle had hired Jeanie Kellogg to manage freight for BJC, despite a clear directive from Moriarty not to hire her or make any other change to the freight program. As far as Moriarty was concerned, Carmicle had blown the second chance he had been given. Shortly thereafter, BJS's controller resigned under peculiar circumstances, first submitting a lengthy resignation letter to Carmicle, then submitting an edited resignation letter to a member of BJI's Board of Directors. At that point, Moriarty was ready to terminate Carmicle's employment for cause.
However, Moriarty was persuaded not to pursue termination at that time. In the spring of 2013, BJI's Board of Directors decided to hire an investment bank and offer the Company for sale, either as a whole or...
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