E.D. Lacey Mills, Inc. v. Keith

• Decision Date: 04 June 1987
• Docket Number: Nos. 74240,74241,s. 74240
• Citation: 359 S.E.2d 148,183 Ga.App. 357
• Parties: E.D. LACEY MILLS, INC. v. KEITH et al. KEITH, et al. v. E.D. LACEY MILLS, INC.
• Court: Georgia Court of Appeals

Page 148

359 S.E.2d 148

183 Ga.App. 357

E.D. LACEY MILLS, INC. v. KEITH et al.

KEITH, et al. v. E.D. LACEY MILLS, INC.

Nos. 74240, 74241.

Court of Appeals of Georgia.

June 4, 1987.

Rehearing Denied June 18, 1987.

Charles T. Lester, Jr., R. Michael Robinson, Atlanta, T. Joseph Campbell, Calhoun, L. Hugh Kemp, Dalton, for appellant.

Bruce C. Smith, Joseph R. Manning, Atlanta, Sam F. Little, Dalton, for appellees.

POPE, Judge.

E.D. Lacey Mills, Inc., d/b/a Lacey Rug Mills ("Lacey"), is a manufacturer of bathroom rugs. In July of 1981, Lacey's president and, at that time, sole owner, commenced negotiations with defendant Shakley for employment with Lacey. Shakley accepted a position as Lacey's vice-president in charge of sales. During negotiations Shakley convinced Lacey's president also to hire defendant Keith, who was at that time employed as vice-president in charge of manufacturing by a competing rug manufacturer. Shakley and Keith had previously worked together as a team for the competing manufacturer before Shakley was dismissed. According to the testimony of Shakley and Keith, it was their lifelong goal to own a rug mill. They believed the arrangement with Lacey offered them that opportunity.

All parties agree that the defendants' employment contracts were oral and terminable at will. For purposes of its motion for summary judgment brought before the trial court, Lacey admits the terms of the agreements were as follows: Shakley was to receive as his compensation a commission of two percent of Lacey's annual sales with $96,000 as a draw against commissions; Keith was to receive a beginning salary of $50,000 to be raised to $70,000 within one year of his employment or when the company became profitable, if sooner; both Keith and Shakley were to receive five percent of plaintiff's stock as a gift; both Keith and Shakley were offered an option to purchase an additional nineteen percent of Lacey's stock for $200,000 and a final eleven per cent, the controlling shares, for $100,000, with financing for the sale to be provided by Lacey's factoring agent; and both Keith and Shakley would be paid three and one-third percent of Lacey's annual pre-tax profits as an annual performance bonus. Lacey further admits its president, in order to induce Keith to leave his previous position immediately, promised Keith he would receive the balance of any bonus or other sums owed to him by his previous employer if not paid in full because of his leaving prior to the date the bonus was to be paid.

Lacey admits defendants performed well and in the years 1983 and 1984 Lacey showed its greatest net profits in over ten years. In July 1984 Lacey's president presented both Keith and Shakley with five percent of the stock, as promised in the employment agreement. He also presented them with a written stock option agreement for the sale of the additional shares of stock. While the proposed stock option agreement offered the first nineteen percent of stock at the $200,000 price agreed upon, it did not provide any means for financing the sale. The proposed written agreement outlined a formula for calculating the price of the final eleven percent of stock which greatly exceeded the original agreement to sell that stock for $100,000. When the parties could not agree to the terms of the stock options, Keith and Shakley began exploring other alternatives for fulfilling their goal of owning a rug mill. While still employed by Lacey, both Keith and Shakley made numerous contacts with, among others, the trustee in bankruptcy for the facilities owned by their now defunct previous employer. They retained an attorney to draft articles of incorporation for a new company and paid earnest money to the trustee in bankruptcy for an option to purchase the facilities of the bankrupt mill. When Lacey's president learned of these activities, Keith was fired and shortly thereafter defendant Shakley resigned. Keith and Shakley immediately went into business in direct competition with Lacey, hiring eighteen of Lacey's 200 employees and retaining seventeen of Lacey's twenty-one sales representatives.

In a multi-count complaint, as amended, Lacey sued Keith and Shakley for damages for the lost value of their services for that time spent working for the interest of their new company; breach of their fiduciary duties in contacting Lacey's employees and sales representatives; tortious interference with contract for inducing employees to leave Lacey's employ; violation of the Uniform Deceptive Trade Practices Act, OCGA § 10-1-372(a)(8), for allegedly making disparaging remarks in the course of soliciting employees; and a claim for unfair competition in violation of the Lanham Act, 15 USC § 1126(h). Keith and Shakley counterclaimed for breach of their respective employment contracts. The trial court granted in part and denied in part both Lacey's motion for partial summary judgment on the counterclaim and defendants' motion for summary judgment on Lacey's complaint. Lacey filed an appeal (no. 74240) and Keith and Shakley filed a cross-appeal (No. 74241), which have been consolidated for consideration.

1. Lacey's first three enumerations of error take exception to the trial court's grant of summary judgment to Keith and Shakley (hereinafter "defendants") as to Count 8 of the amended complaint, which alleges violation of the Lanham Act. We disagree with the trial court's finding that Lacey's pleadings have been pierced as to this allegation and therefore reverse the grant of summary judgment as to Count 8.

Judging from the testimony of its president, Lacey claims it can show defendants engaged in unfair competition in violation of the Lanham Act by using confusingly similar labels and style numbering system, taking Lacey's price list and copying Lacey's product styles. The mere copying of Lacey's rug styles would not give rise to a cause of action under the Lanham Act since "there exists a fundamental right to compete through imitation...." In re Morton-Norwich Prods., 671 F.2d 1332, 1336 (C.C.P.A.1982). However, a claim for violation of the Lanham Act is stated where a plaintiff alleges its competitor copied its styles, coloring and sales packaging so as to create confusion among potential customers as to the origin of the goods. Federal-Mogul-Bower Bearings, v. Azoff, 313 F.2d 405 (6th Cir.1963); Dave Grossman Designs Inc. v. Bortin, 347 F.Supp. 1150 (IV) (N.D.Ill.1972). In the Bortin case, the defendant moving for summary judgment submitted into evidence copies of the product and packaging used by each party, yet the court found insufficient evidence to make a ruling on whether the defendant's trade dress was likely to create confusion or misunderstanding and, therefore, denied the motion for summary judgment. In the case sub judice, defendants based their motion for summary judgment on a simple denial of the plaintiff's allegations. The record is void of any evidence whatsoever concerning the labels for the rugs in question or the issue of customer confusion; therefore, no finding on this issue could properly be made. Since this is a motion for summary judgment, the burden is upon the movant to refute the plaintiff's allegations; plaintiff is not required to present evidence to support the allegations but may resist a motion for summary judgment by doing nothing, relying on the failure of the movant to remove all issues of fact from the case. Cf. Benefield v. Malone, 110 Ga.App. 607, 139 S.E.2d 500 (1964). Defendants presented no evidence which would pierce Lacey's allegations; therefore, summary judgment as to Count 8 was improper.

2. Lacey maintains the trial court erred in denying its motion for summary judgment on defendant Shakley's counterclaim for commissions allegedly earned. The parties agree Shakley's oral employment contract was terminable at will. For purposes of its motion for partial summary judgment, Lacey admits that under the terms of the employment agreement Shakley was to be compensated by a two percent commission. Nevertheless, Lacey argues the compensation agreement is unenforceable as an executory promise. It is true an employee cannot sue to enforce future performance of a terminable-at-will employment agreement. However, an employee may sue on an oral contract for employment terminable at will "for the amount of compensation due him, based upon services actually performed by him up to the time of his discharge, and not for damages or for compensation for services not performed or for any breach of contract." Brazzeal v. Commercial Cas. Ins. Co., 51 Ga.App. 471, 180 S.E. 853 (1935). The authority relied upon by Lacey is inapplicable to the issue of compensation actually earned by an employee for past performance under the terms of a terminable-at-will agreement. "[W]hen the employee has actually performed services [under a contract terminable at will] he may recover of the employer the compensation due him for the services rendered." Spindel v. Nat. Homes Corp., 110 Ga.App. 12, 15, 137 S.E.2d 724 (1964). Where an employee has been discharged under a terminable-at-will employment contract, he may bring an action to recover the commissions due him in accordance with the employment agreement. Brazzeal, supra. The trial court properly denied Lacey's motion for summary judgment on defendant Shakley's counterclaim for commissions allegedly earned.

3. On the other hand, we agree the trial court erred in denying Lacey's motion for summary judgment on defendant Keith's counterclaim to recover the $25,000 year-end bonus which he allegedly earned from his previous employer but lost when he resigned prior to the end of the year. We reject Lacey's argument that the promise to pay Keith the balance of any sums owed to him by the previous employer was an agreement to pay the debt of another and thereby unenforceable under the terms of the Statute of Frauds. Lacey's promise was an original undertaking and thereby not subject to the...