Central Cartage Co. v. Fewless

• Decision Date: 20 November 1998
• Docket Number: Docket No. 199433
• Citation: 232 Mich.App. 517,591 N.W.2d 422
• Parties: , 14 IER Cases 1522, 15 IER Cases 83 CENTRAL CARTAGE CO., a Michigan corporation; Centra, Inc. a Delaware corporation; Central Transport, Inc., a Michigan corporation; P.A.M. Transport, Inc., a Delaware corporation; C.C. Eastern, Inc., a Michigan corporation; and C.C. Southern, Inc., a Michigan corporation, Plaintiffs-Counter-Defendants-Appellants/Cross-Appellees, v. Terry L. FEWLESS; Susan A. Fewless; Susan A. Fewless d/b/a Skan Consulting; and Total Quality, Inc., a Michigan corporation, Defendants-Counter-Plaintiffs- Appellees/Cross-Appellants.
• Court: Court of Appeal of Michigan — District of US

Page 422

591 N.W.2d 422

232 Mich.App. 517, 14 IER Cases 1522,

15 IER Cases 83

CENTRAL CARTAGE CO., a Michigan corporation; Centra, Inc. a Delaware corporation; Central Transport, Inc., a Michigan corporation; P.A.M. Transport, Inc., a Delaware corporation; C.C. Eastern, Inc., a Michigan corporation and C.C. Southern, Inc., a Michigan corporation Plaintiffs-Counter-Defendants-Appellants/Cross-Appellees, v. Terry L. FEWLESS; Susan A. Fewless; Susan A. Fewless d/b/a Skan Consulting; and Total Quality, Inc., a Michigan corporation Defendants-Counter-Plaintiffs- Appellees/Cross-Appellants.

Docket No. 199433.

Court of Appeals of Michigan.

Submitted Sept. 8, 1998, at Lansing.

Decided Nov. 20, 1998, at 9:00 a.m.

Released for Publication Feb. 16, 1999.

Foster, Swift, Collins & Smith, P.C. by Robert E. McFarland and Kathryn M. Niemer, Farmington Hills, for the plaintiffs.

Abood Law by Andrew P. Abood, Lansing, for the defendants.

Before O'CONNELL, P.J., and WAHLS and NEFF, JJ.

NEFF, J.

In this case involving allegations of a breach of fiduciary duty by an employee, plaintiffs, Central Cartage Co. (Central), CenTra, Inc., Central Transport, Inc., P.A.M. Transport, Inc. (P.A.M.), C.C. Eastern, Inc., and C.C. Southern, Inc., appeal from a judgment and order of no cause of action consistent with a jury verdict of no cause of action in favor of defendants Terry L. and Susan A. Fewless, Susan A. Fewless doing business as SKAN Consulting (SKAN), and Total Quality, Inc. (TQI). Defendants cross appeal from the trial court's directed verdict in favor of the plaintiffs regarding plaintiffs' claim for $55,000 received by SKAN from a third party while Terry Fewless was an employee of Central. We affirm in part, reverse in part, and remand.

I

Central is one of several wholly owned transportation subsidiaries of CenTra. The majority of Central's business is in the automotive industry, transporting parts from surrounding states to various automobile plants in Michigan. Because Michigan is considered an "inbound" state, one of Central's goals is to produce business going out of Michigan so that its trucks do not travel outward empty.

Terry Fewless began working for Central in 1976, eventually becoming regional vice president of automotive sales. Fewless secured Wyeth-Ayerst Laboratories (Wyeth) as a customer for Central. Wyeth produced baby formula and other nutritionals in a plant in Mason and needed to transport its products out of state; it was therefore an important account for Central. Various United States Department of Agriculture and Food and Drug Administration regulations require that Wyeth's infant formula stay within a certain temperature range. Because Central had only "dry vans," rather than more costly steel-lined temperature-controlled trailers, Wyeth permitted Central to transport Wyeth freight only within a relatively small area. Central used cargo heaters on the trucks when needed in the winter months, with limited success.

In 1991, Fewless made a "single source" proposal to Wyeth on Central's behalf, in an attempt to obtain brokerage fees. ¹ Fewless advised Central's owner/chief executive officer, Matty Moroun, of the potential for large revenues from Wyeth if Central were to obtain temperature-controlled trucks for more lengthy trips. According to Fewless, Moroun said that he was not interested, saying "That's not our type of business." ²

In the spring of 1992, Wyeth became concerned about a potential nationwide railway strike. Representatives of Wyeth contacted Fewless for assistance in finding a temperature-controlled carrier who could handle Wyeth's freight on long interstate trips. Fewless learned that Navajo Express, one of Central's carriers for automotive parts, had a large fleet of temperature-controlled trailers and advised Navajo to contact Wyeth. ³

Navajo offered Fewless a commission for sending the Wyeth business its way, but Fewless declined, apparently recognizing that it would be inappropriate because he was an employee of Central. Wyeth continued to use Navajo after the railway strike ended, and Fewless' wife, Susan, set up SKAN, which received a six to seven percent commission on the Wyeth freight transported by Navajo. ⁴ Fewless never advised Moroun that Susan was going to be an agent for Navajo with regard to Wyeth freight or that she was receiving commission payments from Navajo.

Realizing that there was great potential for profit in the field of temperature-controlled trucking, Fewless incorporated TQI, applied for a property broker's license, and signed a lease for office space in anticipation of establishing his own third-party logistics company. Fewless testified that he did not actually solicit any business for TQI while he was an employee of Central, and this assertion was confirmed by representatives of both Wyeth and Navajo.

In early December 1992, when confronted with rumors that he had started another company, Fewless admitted that his wife had formed a company that was receiving revenues from Navajo. Fewless tendered a resignation letter to Moroun, in which he stated his intention to start his own logistics company and his desire to maintain a close relationship with Central. On December 7, 1992, Central terminated Fewless' employment. Within a few months after Fewless left Central, TQI entered into written agreements with both Wyeth and Navajo.

Meanwhile, Central began losing more and more of Wyeth's business, which virtually ceased by the end of 1993. A representative of Wyeth testified regarding several temperature-related service failures that required a quarantine of its product, as well as a marked deterioration in the cleanliness of Central's trailers and poor driver attitudes. Wyeth instituted a new policy that required transportation in a temperature-controlled environment to prevent product freezing. Wyeth's position was that it would have continued to use Central or P.A.M. if they had provided temperature-controlled trailers, competitive rates, and competitive service. ⁵

Plaintiffs filed a multiple count complaint against defendants, alleging breach of contract, a common-law obligation not to compete, intentional misrepresentation, innocent misrepresentation, silent fraud, conspiracy to commit fraud, interference with existing contractual relationships, interference with prospective business relations, interference with contractual relations, a right to an accounting, and breach of fiduciary duty. ⁶ At the close of the evidence, the trial court granted defendants' motion for a directed verdict with regard to several claims and granted plaintiffs' motion for a directed verdict regarding their claim for $55,000 paid by Navajo to SKAN while Fewless remained employed by Central. The jury specifically found that Fewless did not breach his fiduciary duty to Central after his termination and returned a verdict of no cause of action on all remaining counts.

II

Plaintiffs first argue that the trial court erred in denying their motion for judgment notwithstanding the verdict (JNOV) or a new trial. We disagree.

In reviewing the denial of a motion for JNOV, this Court views the evidence and all legitimate inferences that may be drawn from the evidence in a light most favorable to the nonmoving party. Jones v. Powell, 227 Mich.App. 662, 676, 577 N.W.2d 130 (1998). "If reasonable jurors could honestly have reached different conclusions, the jury verdict must stand." Severn v. Sperry Corp., 212 Mich.App. 406, 412, 538 N.W.2d 50 (1995).

A

Plaintiffs insist that because the court held defendants liable for the $55,000 in commissions paid by Navajo while Fewless was employed by Central, defendants are also liable for all commissions paid by Navajo to SKAN, and later to TQI, after Fewless was terminated by Central. Specifically, plaintiffs argue that these subsequent commission payments were a mere continuation of Fewless' breach of his fiduciary duties. We disagree.

A fiduciary owes a duty of good faith to his principal and is not permitted to act for himself at his principal's expense during the course of his agency. Production Finishing Corp. v. Shields, 158 Mich.App. 479, 486-487, 405 N.W.2d 171 (1987). A corollary to this rule is that all profits made in the execution of a fiduciary's agency belong to the principal Id. Accordingly, "[i]f an agent acquires any pecuniary advantage to himself from third parties by means of his fiduciary character, he is accountable to his employer for the profit made." Id. at 487, 405 N.W.2d 171; see also Michigan Crown Fender Co. v. Welch, 211 Mich. 148, 159-160, 178 N.W. 684 (1920).

Without question, Fewless breached his fiduciary duties to Central by failing to advise that Navajo was paying SKAN commissions for Wyeth freight. However, we disagree with plaintiffs' assertion that, even after Fewless was terminated from his employment and had advised Central of the situation involving SKAN and Navajo, all future commissions also rightly belonged to Central ad infinitum. We find that, particularly in light of the fact that an agreement not to compete did not exist between Central and Fewless, reasonable minds could differ regarding the question whether, after Fewless was terminated and Central was armed with all relevant facts surrounding the SKAN/Navajo situation, Fewless and TQI were free to pursue these revenues. SCD Chemical Distributors, Inc. v. Medley, 203 Mich.App. 374, 382, 512 N.W.2d 86 (1994). Accordingly, the trial court properly denied plaintiffs' motion for JNOV.

B

Similarly, we find that reasonable minds could differ regarding the issue whether the temperature-controlled transportation brokerage company started by Fewless after his termination from Central represented an usurpation of a business opportunity rightly belonging to Central.

Plaintiffs insist that this question is governed by Production Finishing, supra. We find this reliance is misplaced. In Production Finishing, the defendant was the...