Diedrich v. Miller & Meier & Associates, Architects and Planners, Inc.

• Decision Date: 26 September 1985
• Docket Number: No. 42261,42261
• Court: Georgia Supreme Court
• Parties: , 227 U.S.P.Q. 1052 DIEDRICH et al. v. MILLER & MEIER & ASSOCIATES, ARCHITECTS AND PLANNERS, INC.

Page 308

334 S.E.2d 308

254 Ga. 734, 227 U.S.P.Q. 1052

DIEDRICH et al. v. MILLER & MEIER & ASSOCIATES, ARCHITECTS AND PLANNERS, INC.

No. 42261.

Supreme Court of Georgia.

Sept. 26, 1985.

Howell Hollis III, T. Ryan Mock, Jr., Freeman & Hawkins, Atlanta, for Richard J. Diedrich et al.

Randolph A. Mayer, Michael T. Nations, Mayer & Nations, Atlanta, for Miller & Meier & Associates et al.

King & Spalding, Frank C. Jones, John D. Hopkins, Michael J. Egan III, amicus curiae.

GREGORY, Justice.

We granted certiorari to consider two of the issues raised in Miller & Meier & Associates, Architects and Planners, Inc. v. Richard D. Diedrich et al., 174 Ga.App. 249, 329 S.E.2d 918 (1985). Our concern is with (A) the application of OCGA § 14-2-153(a)(1)(C) (wrongful appropriation of a corporate business opportunity) to an officer and director of a foreign corporation, and (B) awarding damages, rather than injunctive relief, for infringement of a trade name. In the trial court a Wisconsin corporation (Miller & Meier) received a jury verdict in its favor against its former officer and director (Diedrich) and his separate Georgia corporation. The trial judge awarded a judgment notwithstanding the verdict in favor of Diedrich and the Georgia corporation. ¹ OCGA § 9-11-50(b). The Court of Appeals reversed.

The Wisconsin corporation ² was a Milwaukee architectural firm organized under the laws of Wisconsin in 1970. Of the 7,660 outstanding shares of the corporation, 5,100 were owned by Miller, 760 by Diedrich and the remainder by others. Diedrich was an officer and director. The Wisconsin corporation opened a branch in Atlanta and secured a certificate of authority to transact business in Georgia pursuant to the requirements of our statute which is currently codified at OCGA § 14-2-310. Diedrich moved to Georgia in 1972 for the purpose of managing the Atlanta branch for the Wisconsin corporation. In 1978 Diedrich formed a Georgia corporation, M.W.D. Architects Atlanta, Inc. He was the sole shareholder. The Georgia corporation was operated from the same office as the Wisconsin corporation. In 1982 the shareholders of the Wisconsin corporation removed Diedrich as an officer and director and the corporation brought this action against him and the Georgia corporation in Fulton Superior Court. A jury verdict in the amount of $130,000 was rendered against Diedrich and the Georgia corporation. It was, as already indicated, set aside by the trial judge who granted J.N.O.V. against the Wisconsin corporation. One of the grounds upon which J.N.O.V. was granted was that OCGA § 14-2-153(a)(1)(C) does not apply to the Georgia director of a foreign corporation. In division two of the Court of Appeals' opinion the trial court was reversed on this issue. The Court of Appeals reasoned that a foreign corporation which obtains a certificate of authority enjoys the same rights and privileges as a Georgia corporation, and likewise, is subject to the same duties, restrictions, penalties, and liabilities. OCGA § 14-2-311. From this the court concluded that if a Georgia corporation is afforded protection against wrongful appropriation of business opportunities by officers and directors under Georgia law, the same protection is to be afforded to foreign corporations which have obtained a certificate of authority.

In division five the Court of Appeals reversed the trial court ruling that Georgia does not recognize a common law action for damages against trade name infringement. It affirmed the ruling that a "logo" or trademark must be registered before an action will lie for its infringement.

1. In our view the Court of Appeals, in division two of its opinion, failed to give proper consideration to OCGA § 14-2-310. This section of the Business Corporations Code requires a foreign corporation to obtain a certificate of authority before it has the right to transact business in Georgia. However, the section provides that "... nothing contained in this Chapter (Chapter 2 of Title 14--Business Corporations) shall be construed to authorize this state to regulate the organization or the internal affairs of such corporation. (A foreign corporation with a certificate of authority.)" This is a recognition of the internal affairs doctrine which has been described as "... involved whenever the issue concerns the relations inter se of the corporation, its shareholders, directors, officers or agents...." Restatement (Second) Conflicts of Laws § 313. ³ We hold that the wrongful appropriation of a business opportunity of a foreign corporation by its officer or director is an internal affair not to be regulated by Georgia law. Instead, the local law of the state of incorporation applies, which is Wisconsin in this case. Restatement (Second) Conflicts of Law § 309, ⁴ see, Kaplan, Stanley H., "Foreign Corporations and Local Corporate Policy," 21 Vand.L.Rev. 433, 464-5 (1968). ⁵

Southeast Consultants, Inc., et al v. McCrary Engineering Corp., 246 Ga. 503, 273 S.E.2d 112 (1980) has been cited for a contrary result. However, the choice of law issue we now decide was simply not presented there.

2. Turning now to the trade name issue we point out that this court has previously held that Georgia protects trade names by statute and by common law. Giant Mart Corp. v. Giant Discount Foods, Inc., 247 Ga. 775, 279 S.E.2d 683 (1981). Diedrich and the Georgia corporation contend the common law right was displaced by enactment of the Uniform Trade Practices Act. OCGA § 10-1-371, et seq. However, we find the Act expressly preserves common law rights in this regard. OCGA §§ 10-1-372(c) and 373(c).

The contention is made that if the right to protection of a trade name exists, the remedy is limited to injunctive relief and damages do not lie. We disagree. "When the law requires a person to perform an act for the benefit of another or to refrain from doing an act which may injure another, although no cause of action is given in express terms, the injured party may recover for the breach of such legal duty if he suffers damage thereby." OCGA § 51-1-6. See also, Hagan & Dodd Co. v. Rigbers, 1 Ga.App. 100, 57 S.E. 970 (1907).

If on retrial Miller & Meier contends that it has rights relating to its "logo" it may clarify whether those rights are claimed as part of a trade name as considered in the preceding paragraph or as part of a service mark or...