Coffman v. Olson & Co., P.C., 53A04-0804-CV-190.

Decision Date18 May 2009
Docket NumberNo. 53A04-0804-CV-190.,53A04-0804-CV-190.
Citation906 N.E.2d 201
PartiesCraig P. COFFMAN and Coffman Proactive CPA Services, LLC, Appellants-Defendants/Cross-Appellees, v. OLSON & COMPANY, P.C., Appellee-Plaintiff/Cross-Appellant.
CourtIndiana Appellate Court

Richard W. Lorenz, Hickam & Lorenz, P.C., Spencer, IN, Attorney for Appellants.

Michael L. Carmin, Andrews, Harrell, Mann, Carmin & Parker, P.C., Bloomington, IN, Attorney for Appellee.

OPINION

KIRSCH, Judge.

Craig P. Coffman and Coffman Proactive CPA Services, LLC (collectively, "Appellants"), appeal the trial court's judgment in favor of Coffman's former employer, Olson & Company, P.C. ("Olson"), on Olson's claim for breach of a confidential non-disclosure and client proprietary agreement ("the Agreement"). Both sides appeal the trial court's damages award. The issues presented in this appeal are as follows:

I. Whether Olson had a protectable interest that could be enforced by the noncompetition provision of the Agreement; and

II. Whether the trial court erred by voiding the liquidated damages provision in the Agreement and calculating the damages award.

We affirm.

FACTS AND PROCEDURAL HISTORY

The relevant facts are undisputed. Coffman is a certified public accountant whom Olson employed in 1996. Each year, Olson requires its employees to sign the Agreement. The version of the Agreement that Coffman signed in 2005 reads in pertinent part as follows:

4. In the event of the termination of employment between the undersigned and Olson & Co., the undersigned will not directly or indirectly compete for the clients of Olson & Co. for a period of two years in the geographical area of Lawrence County and Monroe County, Indiana, as an employee, agent, independent contractor, partner, shareholder, or principal of, any other Certified Public Accounting firm whether operated as a corporation, partnership, proprietorship, or association; within the boundaries of the territory prescribed by this Agreement. This agreement does not restrict or prohibit the undersigned from becoming an employee of another Certified Public Accounting firm, or from establishing his or her own accounting practice for the purpose of servicing clients that are not Olson & Co. clients at the time of termination or have not been Olson & Co. clients for a period of more than 24 months preceding the termination date. This agreement does not restrict the undersigned from obtaining clients, other than Olson & Co. clients for the purpose of providing accounting services as those terms are generally understood. This agreement does not restrict the undersigned from servicing former Olson & Co. clients who have not been Olson & Co. clients for a period of more than 24 months. It is further understood and agreed that any clients that might have been brought to the firm through the efforts of the undersigned are firm clients and are subject to this restriction.

....

6. The undersigned shall not, either for himself or herself or for any other person, firm or corporation divert or take away or attempt to divert or take away, and during the stated period following termination, call upon or solicit or attempt to call upon or solicit any of the customers or clients of Olson & Co., including, but not limited to, those upon whom he or she has called, or whom he or she solicited, or to whom catered, or with whom he or she became acquainted while employed by Olson & Co.

7. The undersigned agrees that in the event the undersigned or any person, firm or corporation with whom the undersigned is associated, performs accounting services for any Olson & Co. client during the two-year period following the undersigned's termination of employment with Olson & Co., then the undersigned shall pay Olson & Co. an equal amount to two (2) times that client's most recent twelve months billings with Olson & Co. The undersigned further agrees to notify Olson & Co. in writing within thirty (30) days of commencing work for any such client and to pay the sum due hereunder within ten (10) days of such notification. If the undersigned fails to notify or pay Olson &amp Co. as provided hereunder, the amount due Olson & Co. shall be equal to three (3) times that client's most recent twelve months billing with Olson & Co.

Appellants' App. at 20-22.

Coffman first signed the Agreement in 1996 and did so annually through 2005. In 2006, Coffman refused to sign the Agreement because he was unhappy with changes to Olson's personnel and compensation policies. In anticipation of leaving his employment, Coffman formed Coffman Proactive CPA Services, LLC. Ultimately, Olson and Coffman agreed that Coffman would terminate his employment effective September 1, 2006.

Thereafter, Coffman performed accounting services for seventeen Olson clients, each of whom contacted Coffman after learning that he had left Olson. Coffman advised the clients that he could not solicit their business. The clients terminated their relationship with Olson and hired Coffman. Coffman did not notify or compensate Olson.

On November 13, 2006, Olson filed suit against Appellants. A bench trial was held on October 5, 2007. The trial court permitted the parties to file post-trial briefs.1 On January 22, 2008, the trial court issued a judgment containing findings of fact and the following relevant conclusions thereon:

Olson alleges that Coffman breached the Agreement by (1) accepting employment from Olson clients within 24 months of his termination of employment, and failing to pay the amounts set forth in Paragraph # 7 of the Agreement; (2) diverting or taking away or soliciting Olson clients. Olson also alleges that Coffman Proactive Services, LLC has tortiously interfered with the contract between Olson and Coffman.

Coffman asserts that the Agreement is invalid because (A) there was no consideration for the Agreement; (B) the Agreement constitutes an unreasonable restraint of trade; (C) the terms of the Agreement are overly broad. Coffman also asserts that the damages specified in the Agreement constitute a penalty and are therefore unenforceable.

....

Reasonableness of the Agreement

Coffman argues that the Agreement constitutes an unreasonable restraint of trade and that the terms of the Agreement are overly broad. These arguments are closely related. Both attack the reasonableness of the noncompetition clause in light of the employer's interests to be protected, and in light of the effect on Coffman and the public.

....

An employer is entitled to contract to protect the good will of the business. Elements of this good will include secret or confidential information such as the names, addresses and requirements of customers and the advantage acquired through representative contact. These are property rights that an employer is entitled to protect. In considering what is reasonable, regard must be paid to: (a) the question whether the promise is wider than is necessary for the protection of the covenantee in some legitimate interest; (b) the effect of the promise upon the covenantor; and (c) the effect upon the public.

The evidence demonstrates that Coffman knew the names, addresses, and requirements of Olson's clients and that he had acquired an advantage through representative contact with these clients. Clearly, Olson has established a legitimate interest that may be protected by a covenant not to compete.

....

Liquidated Damages

More problematic is the liquidated damages provision contained in the Agreement....

....

Pursuant to the terms of the Agreement, if Coffman performs any accounting services for a former client, no matter how minor, the liquidated damages provision is triggered. Coffman is then required to pay a minimum of two times that client's most recent 12-month billings to Olson. If he fails to give notice within 10 days of rendering the service, he must pay three times this amount. This liquidated damage clause is clearly intended to act as a penalty and is therefore unenforceable.

However, this does not mean that Olson is not entitled to recover the damages that reasonably flow from Coffman's breach....

Neither party has introduced evidence as to the amount of fees received by Coffman from Olson's former clients up to the date of the hearing. Therefore, the Court must make this determination based on the available evidence. That evidence demonstrates that, in the 12 months prior to Coffman's termination, Olson received fees totaled $79,263 from the clients in question. The Court finds that this is a reasonable measure of the damages sustained by Olson for the 13 month period following Coffman's breach.

Nonsolicitation

Paragraph 6 of the Agreement prohibits Coffman from diverting, "taking away," or soliciting Olson clients. Each of Olson's former clients testified that, after learning that Coffman had left Olson's employ, they made an independent decision to discontinue their use of Olson's services and to utilize Coffman['s] services. The evidence does not support a finding that Coffman attempted to solicit his former Olson clients.

ORDER

It is therefore Ordered, Adjudged and Decreed that judgment is entered for the Plaintiff and against the Defendants in the sum of $79,263 and court costs.

Id. at 11-16 (citations omitted).2

DISCUSSION AND DECISION
Standard of Review

Here, the trial court sua sponte issued findings of fact and conclusions thereon in support of its order. In that situation, the specific findings control only as to the issues they cover, while a general judgment standard applies to any issue upon which the court has made no findings. See Dewbrew v. Dewbrew, 849 N.E.2d 636, 640 (Ind.Ct.App.2006). In reviewing the judgment, this court must determine whether the evidence supports the findings and whether the findings, in turn, support the conclusion and judgment. Id. We will reverse a judgment only when it is shown to be clearly erroneous, i.e., when the judgment is unsupported by the findings of fact and the conclusions entered on the...

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