Continental Carbonic Products Inc. v. Cohen

• Decision Date: 11 October 2006
• Docket Number: No. CA 05-1091.,CA 05-1091.
• Citation: Continental Carbonic Products Inc. v. Cohen, 241 S.W.3d 296, 96 Ark.App. 305 (Ark. App. 2006)
• Parties: CONTINENTAL CARBONIC PRODUCTS, INC., Appellant, v. Phillip COHEN, Appellee.
• Court: Arkansas Court of Appeals

241 S.W.3d 296

96 Ark.App. 305

CONTINENTAL CARBONIC PRODUCTS, INC., Appellant, v.Phillip COHEN, Appellee.

No. CA 05-1091.

Court of Appeals of Arkansas.

October 11, 2006.

Friday, Eldredge & Clark, by: David D. Wilson, Little Rock, AR, for appellee.

Taylor Law Firm, by: Timothy L. Brooks, Fayetteville, AR, for appellee.

TERRY CRABTREE, Judge.

AppelleePhillip Cohen sued his former employer, appellant Continental Carbonic Products, for breach of contract for nonpayment of stock options after his employment terminated.The jury found in favor of Cohen.Continental appeals, contending that the trial court erred in failing to grant its motions for directed verdict and for judgment notwithstanding the verdict and that the trial court erred in admitting evidence to the effect that Continental could not demonstrate any financial harm as a result of Cohen's employment with a competitor.We affirm.

Background

Continental manufactures and sells dry ice for use in many different applications.Although the manufacture of dry ice is its primary product line, Continental also sells blasting equipment for use in the cleaning of industrial equipment.In 1991, Cohen became employed by Continental as a salesman.In accepting this position, Cohen signed non-competition agreements with Continental and its subsidiary Dixie Carbonic, Inc.(Dixie).The relevant terms of these agreements had the effect of prohibiting Cohen from going to work for a competitor who sold competitive products within a seventy-five-mile radius of any Continental facility for a two-year period following termination of employment with Continental.On May 17, 2002, Cohen submitted his two-week notice, effectively resigning from Continental as of May 31, 2002.Pursuant to the express terms of the non-competition agreements, Cohen would be prohibited from going to work for a competitor through May 31, 2004.

During his employment with Continental, Cohen received certain stock options.Upon terminating his employment with Continental, Cohen exercised those options.On May 24, 2002, Cohen and Continental entered into a Stock Option Settlement Agreement (the option settlement) whereby the total value of the options was agreed upon, as well as the terms and conditions of the payout for the options.The option settlement contained the following language: "All future payments will be forfeited for any violations of the employee's Confidentiality and Non-Compete Agreements."

A few months out after leaving employment with Continental, Cohen was offered employment with Cold Jet, Inc., a competitor of Continental within the dry-ice industry.Cold Jet's principal business was the manufacture and sale of dry-ice blasting equipment for use in industrial cleaning applications.Cold Jet also sold pelletized dry ice to its customers for use with the blasting equipment.Continental and Cold Jet also did extensive business with each other.

Cohen accepted the position at Cold Jet, but prior to doing so, he negotiated a limited release of his obligations to Continental.The release contained the following language: "[Continental and Dixie] agree to release Cohen from the Non-Compete Agreements for the sole purpose of allowing Cohen to sell dry ice blasting equipment manufactured by Cold Jet....Other than for the foregoing limited release, the Non-Compete Agreements shall remain in full force and effect...."Cohen sold blasting equipment for Cold Jet until March 29, 2004, when he accepted a promotion to become Cold Jet's vice president of customer-service relations.This position did not involve selling blasting equipment.The position had responsibility to supervise Cold Jet's dry-ice sales staff, and Cohen received a commission on all sales of dry ice.

On May 17, 2004, Continental informed Cohen by letter that he had violated the terms of his non-competition agreement and the release and, therefore, had forfeited the remaining balance due under the terms of the option settlement.The reasons given were the very nature of Cohen's position as vice president of customer-service relations and the few ice referrals received during Cohen's tenure as a blasting equipment salesman.The letter also noted that the agreements between Cohen and Continental prohibited Cohen from arranging any dry-ice sales with any supplier except for Continental.

Cohen filed suit against Continental, alleging that it breached the option settlement agreement to pay Cohen the remaining $49,339.35 owed for his stock options.Continental denied the material allegations of the complaint and also pled that Cohen was in breach of the various agreements.¹

The Evidence

Phillip Cohen testified that he signed the non-competition agreements and understood them to mean that he could remain in the dry-ice business as long as he remained more than seventy-five miles from a Continental location.He was aware that the option settlement contained a provision that future payments would be forfeited if he violated the non-competition agreement.Cohen said that he understood that the release allowed him to sell equipment for Cold Jet and refer dry-ice sales to Continental.He also stated that, when he was selling blasting equipment for Cold Jet, he referred all customers who wanted dry ice to Continental, where Cold Jet obtained its dry ice, and denied that he sold or arranged the sale of dry ice for anyone other than Continental while employed at Cold Jet.He said that Continental wanted him to work for Cold Jet because he would be referring ice sales to Continental.According to Cohen, there was no Continental facility within seventy-five miles of his home.He said that he was paid like other salesmen, based on a formula including dry-ice sales.

In late March 2004, after Cold Jet acquired ownership of a competitor, Cohen was offered a promotion to vice president of customer-service relations and dealt with all aspects of customer service, including dry ice.He was no longer involved in selling blasting equipment and was not calling on customers trying to sell ice.He said that, after his promotion, he trained a salesman to take over his territory and traveled to California to learn the operations of the newly acquired company.He denied making any sales of ice prior to the expiration of the non-competition agreement.Cohen's compensation included percentages of certain company activities, including dry ice.He denied taking the promotion prior to March 2004.

Three Continental executives, Robert Wiesemann, Continental's chief executive, John Funk, president, and Randy Spitz, vice president and chief financial officer, each testified that they understood the non-competition agreements to prohibit Cohen from working for any company if that other company had employees or a facility within seventy-five miles of a Continental facility, even if Cohen himself were not within that radius of a Continental facility.Wiesemann said that he was responsible for the forfeiture provision in the option settlement.None of the executives had any specific knowledge of any person to whom Cohen solicited the sale of ice or actually sold dry ice after his promotion.They also said that they did not have personal knowledge of any of Cohen's actions between March 29, 2004, and May 31, 2004, that caused any specific damages or loss of sales to Continental.All three opined that Cohen's taking the promotion itself was a violation of the non-competition agreement and release.They also said that Cohen could not be compensated based on dry-ice sales because that would be a breach of the non-competition agreement but admitted that there was no specific language in the release...