Century Bus. Servs., Inc. v. Barton
| Decision Date | 17 November 2011 |
| Docket Number | No. 95542.,95542. |
| Citation | 197 Ohio App.3d 352,2011 -Ohio- 5917,967 N.E.2d 782 |
| Parties | CENTURY BUSINESS SERVICES, INC., et al., Appellees, v. BARTON et al., Appellants. |
| Court | Ohio Court of Appeals |
OPINION TEXT STARTS HERE
Ulmer & Berne L.L.P., Jeffrey S. Dunlap, Ronald H. Isroff, and Reem Shalodi, Cleveland; and Stinson Morrison Hecker, L.L.P., and John C. Aisenbrey, for appellees.
McCarthy, Lebit, Crystal & Liffman Co., David A. Schaefer, and Leslie E. Wargo, Cleveland; and Lommen, Abdo, Cole, King & Stageberg, P.A., Phillip A. Cole, Kay Nord Hunt, and Diane M. Odeen, for appellants.
[Ohio App.3d 356]{¶ 1} Defendants-appellants, Thomas Barton, Anthony Krier, James Stelzer, and John Walter, appeal from the judgment of the trial court that granted plaintiff-appellee, Century Business Services, Inc., otherwise known as CBIZ, Inc., and its subsidiary CBIZ BVKT, L.L.C., d.b.a. CBIZ Accounting & Tax Advisory, L.L.C. (collectively referred to as “CBIZ”), injunctive relief, damages, attorney fees, litigation fees, and costs in CBIZ's action for breach of various agreements. For the reasons set forth below, we affirm.
{¶ 2} This matter arises from a series of agreements that CBIZ entered into with defendants, certified public accountants who are licensed by the state of Minnesota and work in Minnesota. In 1988, Barton was hired by the New Hope, Minnesota firm of Bertram, Vallez, Kaplan & Talbot, Ltd. (“Bertram Vallez”), an accounting firm that performs “attest accounting services,” or services such as audits, reviews of financial statements, and examinations of financial information that require an accountant to exercise independence, and “nonattest services,” such as bookkeeping services, payroll services, and tax services. 1 According to Minn.Stat. 326A.10, only CPA licensees may perform attest services. Minnesota nonetheless recognizes an “alternative practice structure” under which a company may be compensated for providing staffing and labor for attest accounting services and performing nonattest services. See Minn.Stat. 326A.02.
[Ohio App.3d 357]Barton's Agreements
{¶ 3} By 1998, Barton had become a shareholder at Bertram Vallez, and defendants Krier, Stelzer, and Walter were also working there under employment agreements. On August 20, 1998, CBIZ, an Ohio company that is not a licensed public accounting firm, bought Bertram Vallez's nonattest accounting practice for $12 million and renamed it “CBIZ BVKT, L.L.C.” (“CBIZ BVKT”). Barton received $184,756 in cash and 12,545 shares of CBIZ stock, plus an “earn-out” payment of $112,320 and an additional 6,815 shares of stock. On August 20, 1998, Barton and other shareholders of Bertram Vallez signed an agreement and plan of merger (“merger agreement”) and an executive-employment agreement.
{¶ 4} The merger agreement prohibited Barton from disclosing confidential information, including information pertaining to clients and prospective clients and information pertaining to employees. The noncompetition provision of the merger agreement prohibited Barton and the other shareholders from entering into, engaging in, promoting, or assisting any business that competes with CBIZ BVKT in the greater Minneapolis metropolitan area, encompassing seven counties, for five years from the date of the agreement, which would be August 20, 2003. The noncompetition provision additionally prohibited Barton from soliciting clients and prospective clients, inducing CBIZ BVKT employees, agents, and others to terminate their relationship with the corporation, and from employing such individuals for ten years from the date of the agreement, or until August 20, 2008.
{¶ 5} The merger agreement further indicated that violations and attempted violations would entitle CBIZ BVKT to liquidated damages, entitling CBIZ BVKT to 100 percent of the gross revenue derived from violation of the merger agreement.
{¶ 6} Barton and CBIZ BVKT also signed an executive-employment agreement in August 1998. This document provided that Barton's employment would commence on August 20, 1998, and “expire on the seventh anniversary of” that date, or August 20, 2005, but that Barton's obligations under Sections 6–10 of the executive-employment agreement would “survive expiration of” the seven-year term.
{¶ 7} Section 6 of the executive-employment agreement set forth various restrictions in place “during the period in which the Executive is employed by the Company and for five (5) years thereafter” and provided that Barton would not engage in any business that competes with CBIZ BVKT in the seven counties comprising the greater Minneapolis metropolitan area, would not solicit CBIZ BVKT clients, would not induce CBIZ BVKT employees and other individuals to terminate their relationship with the corporation, and would not employ such individuals.
[Ohio App.3d 358]{¶ 8} Section 7 of the executive-employment agreement also prohibited Barton from disclosing at any time “confidential information,” which was defined to include the names, addresses, and telephone numbers of clients and “qualified prospective clients” and employees' compensation rates.
{¶ 9} Remedies for violations were set forth in Section 10 and included a liquidated-damages provision entitling CBIZ BVKT to 100 percent of the gross revenue derived during the two-year period following the violation and also included injunctive relief.
{¶ 10} Following the sale of the nonattest accounting services to CBIZ BVKT, Bertram Vallez continued to perform attest accounting services. Bertram Vallez then entered into an administrative services agreement with CBIZ BVKT, wherein it agreed that CBIZ BVKT would provide nonattest accounting services for its clients and Bertram Vallez would provide only attest accounting services and would purchase its professional administrative services from CBIZ BVKT.
{¶ 11} Upon the execution of the agreements described infra, all of Bertram Vallez's existing employment contracts were terminated. Defendants Stelzer, Walter, and Krier continued to work as at-will employees of CBIZ BVKT. By 2004, CBIZ BVKT informed these employees that they were required to sign a confidentiality-and-nonsolicitation agreement, which prohibited them from soliciting firm clients and employing firm employees. The confidentiality-and-nonsolicitation agreement also contained a liquidated-damages provision entitling CBIZ BVKT to 100 percent of the gross revenue derived during the 24–month period following the violation. It provided that the agreement would be governed and construed in accordance with the laws of the state of Ohio and that if disputes arose, the employee would submit to Ohio jurisdiction with venue in Cuyahoga County and would consent to service of process.
{¶ 12} In 2005, CBIZ BVKT informed defendants that in order to remain in New Hope, Minnesota, Bertram Vallez would be merged into Mayer Hoffman McCann, P.C. (“MHM”), an entity that was also located in New Hope, Minnesota, and also had an administrative-services agreement with CBIZ, under which it provided accounting services under the “alternative practice structure.” CBIZ provided personnel to assist with the attest accounting services, and CBIZ performed the nonattest accounting services.
{¶ 13} Bertram Vallez subsequently consented to the merger and terminated its accounting practice. Defendants signed various agreements with MHM and became employees and shareholders of that entity.
[Ohio App.3d 359]{¶ 14} By late 2007, CBIZ BVKT informed defendants that CBIZ BVKT's New Hope office was to be consolidated with CBIZ's office in Minneapolis, Minnesota. On August 1, 2008, defendants resigned from CBIZ BVKT and MHM and formed Barton, Walter & Krier, L.L.C. (“BWK”). On August 2, 2008, under letterhead from the new firm, defendants informed their clients of their resignations, provided them with defendants' new e-mail addresses and phone numbers, and provided them with form letters for terminating their existing relationship with CBIZ BVKT and MHM and for engaging BWK. On August 2, 2008, defendants contacted some of their former co-workers at the New Hope office and offered them positions with BWK. On August 4, 2008, ten other employees resigned from CBIZ BVKT.
{¶ 15} On August 7, 2008, CBIZ and CBIZ BVKT filed a complaint against defendants 2 for breach of the merger agreement, breach of the executive-employment agreement, breach of the confidentiality-and-nonsolicitation agreement, breach of duty of loyalty, and trade-secret misappropriation. On that same day, CBIZ obtained an ex parte temporary restraining order against defendants, which prohibited them from soliciting CBIZ clients or entering into any business that competes with CBIZ in the greater Minneapolis metropolitan area and ordered them to return property and “any information of any sort” to CBIZ.
{¶ 16} The trial court held a consolidated hearing on the preliminary and permanent injunctions on September 4, 2008, per the agreement of the parties. Thereafter, on October 9, 2008, the trial court granted the preliminary and permanent injunctions, concluding that defendants had breached their confidentiality-and-nonsolicitation agreement and that CBIZ was entitled to injunctive relief. The court ordered that for a period of five years from the date of its order, Barton was enjoined from engaging in, promoting, assisting, or consulting with any business that competes with CBIZ; soliciting, attempting to solicit, and calling upon any of CBIZ's clients or prospective clients; inducing employees, agents, and various others to terminate its relationship with the corporation; and employing those individuals. The remaining defendants were similarly enjoined for a two-year period. The court also concluded that plaintiffs were entitled to attorney fees and costs associated with the injunctive relief and held a hearing as to the issues...
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