Encore Tech. Grp. v. Keone Trask & Clear Touch Interactive, Inc.

Decision Date24 November 2021
Docket NumberAppellate Case 2018-001444,5871
PartiesEncore Technology Group, LLC, Respondent/Appellant, v. Keone Trask and Clear Touch Interactive, Inc. f/k/a Clear Touch Interactive, LLC, Appellants/Respondents. AND Clear Touch Interactive, Inc. f/k/a Clear Touch Interactive, LLC, Appellant/Respondent, v. Encore Technology Group, LLC, Respondent/Appellant.
CourtCourt of Appeals of South Carolina

Encore Technology Group, LLC, Respondent/Appellant,
v.
Keone Trask and Clear Touch Interactive, Inc. f/k/a Clear Touch Interactive, LLC, Appellants/Respondents.

AND

Clear Touch Interactive, Inc. f/k/a Clear Touch Interactive, LLC, Appellant/Respondent,
v.
Encore Technology Group, LLC, Respondent/Appellant.

No. 5871

Appellate Case No. 2018-001444

Court of Appeals of South Carolina

November 24, 2021


Heard September 15, 2021

Appeal From Greenville County R. Lawton McIntosh, Circuit Court Judge

Joseph Owen Smith and Joshua Jennings Hudson, both of Smith Hudson Law, LLC, of Greenville, for Keone Trask and Clear Touch Interactive, Inc.

1

Gregory Jacobs English and Rita Bolt Barker, both of Wyche, PA, of Greenville, for Encore Technology Group, LLC.

HEWITT, J.

This is a consolidated appeal of two cases. We heard them in conjunction with a third case. All three arise out of a dispute between Encore Technology Group, LLC (Encore) and Keone Trask.

Trask is a former Encore executive. These controversies center around the fact that he was running another company-Clear Touch Interactive, Inc. (Clear Touch)- and competing with Encore at the same time he was working for Encore.

In the first of the consolidated cases, Encore sued Trask and Clear Touch on eight claims and won on six. A jury awarded a total of roughly $7.9 million against Trask and $1.7 million against Clear Touch. The total against Trask is hotly disputed. Election of remedies is the main issue and the predominant topic of this opinion.

In the second case, Clear Touch appeals an order dismissing the lawsuit it brought against Encore. The main issue in that case is res judicata.

As mentioned above, the third case is not consolidated with the others and is a case about Clear Touch's corporate structure. We will refer to that case as Powell, though we deal with it in a separate (and unpublished) opinion.

It is impossible to summarize our decision in a way that is comprehensive but concise. Depending on how you count, the parties raised as many as seventeen issues. In the first case, we hold Encore's damages for breach of contract with a fraudulent act necessarily encompassed Encore's damages for breach of contract, misappropriation of trade secrets, and breach of fiduciary duty. Thus, we find the circuit court erred in holding Encore did not have to elect between most of its remedies against Trask. In all other respects, the circuit court's decision is affirmed.

In the second case, we find the circuit court correctly held Clear Touch's lawsuit against Encore was barred by res judicata. Clear Touch used the same facts for an unclean hands defense in the first case.

FACTS

2

Encore, Trask, and Clear Touch are all in the "classroom technology" business. Trask's job at Encore included selecting a vendor to supply Encore with touchscreen technology to sell to schools. There is basically no dispute that Trask created Clear Touch before he joined Encore, used Clear Touch to import touchscreen technology from overseas, and sold the technology to Encore after marking up the price. Trask kept his involvement with Clear Touch a secret throughout his time at Encore.

Encore eventually learned this history and sued. It sued Trask for breach of the duty of loyalty, breach of fiduciary duties, breach of contract, and breach of contract accompanied by a fraudulent act. It sued Clear Touch for tortious interference, and it sued Trask and Clear Touch together for allegedly violating the South Carolina Trade Secrets Act, the Unfair Trade Practices Act, and for defamation. Encore additionally brought an equitable claim against Clear Touch for restitution.

About two weeks before trial, Clear Touch sued Encore in a separate case based on materials Encore turned over in discovery approximately four months earlier. Not long after the trial on Encore's claims ended, the circuit court dismissed Clear Touch's case based on res judicata. As noted in our introduction to this opinion, the reason for this dismissal was that Clear Touch used the same facts for an unclean hands defense against Encore's claims in the recently-concluded trial.

Damages are a key feature of this appeal. The parties argue at length over testimony from Encore's accounting expert about the different methods he used to calculate Encore's damages. The expert created three tables, all of which were entered into evidence separately from the expert's report.

Table 1 was the expert's calculation of the direct costs such as wages, benefits, expense reimbursements, and costs that Encore incurred during Trask's employment. Encore sought these as damages based on its claim that Trask and other allegedly disloyal employees were building Clear Touch's business while they were on Encore's payroll. Here, the total claimed damages were roughly $448, 000.

Table 2 was the expert's calculation of Encore's lost profits. There were two categories of these: profits on sales Clear Touch made to Encore (again, at markup; diminishing Encore's profit margin) and profits on sales Clear Touch made to Leon County Schools-an Encore customer. The calculations were broken down into periods correlating to the time Trask was employed with Encore, the time Trask's noncompete provision was in place, and the time between the expiration of Trask's noncompete and Encore terminating its relationship with Clear Touch. This table put Encore's lost profits at roughly $1.1 million.

3

Table 3 contained the expert's calculation of Encore's damages related to the loss of Clear Touch as a "business opportunity." Encore claimed Trask (its Chief Business Development Officer) was obligated to develop the opportunity he saw in Clear Touch as a part of Encore rather than as a separate business for his own benefit. Table 3 broke down Clear Touch's normalized profits into several different time periods. The expert calculated that the Clear Touch opportunity had a fair market value of $3.9 million as of December 31, 2015. The total damages in this table, including all normalized profits and the expert's fair market value calculation, amounted to about $5.5 million.

The jury found for Encore on six of its eight claims. It awarded the exact same amount of actual damages on two claims against Trask and two claims against Clear Touch. The awards of actual damages are as follows:

Against Trask

Against Clear Touch

Breach of Loyalty: $375, 733.40

Trade Secrets: $424, 945

Fiduciary Duty: $675, 361

Tortious Interference: $424, 945

Breach of Contract: $424, 945

Trade Secrets: $424, 945

Breach with Fraud: $1, 476, 039.40

The jury awarded exemplary or punitive damages on all claims in which they were available. The largest punitive award against Trask was on breach of contract accompanied by a fraudulent act for $2 million.

The circuit court held Encore need only elect between the claims in which the jury awarded the same amount of actual damages. Against Trask, these were breach of contract and misappropriation of trade secrets. The court reasoned distinct facts gave rise to Encore's other various claims and that the jury used each of those claims to compensate for different injuries from Trask's wrongful conduct.

The court denied Trask and Clear Touch's post-trial motions and awarded Encore attorneys' fees and costs. The court also denied Encore's post-trial motion to be awarded the fair market value of Clear Touch as restitution.

Clear Touch paid the judgment against it into court, but the court appointed a receiver and allowed Encore to intervene in a separate case-Powell-to secure the judgment against Trask. Trask eventually paid the judgments against him into court.

4

This appeal followed. After that, the circuit court stayed the receivership and dismissed Encore from Powell.

ISSUES

In Encore's case against Trask and Clear Touch, Trask and Clear Touch argue about election of remedies, a new trial absolute, a new trial nisi remittitur, judgment notwithstanding the verdict (JNOV), a new trial pursuant to the thirteenth juror doctrine, and attorneys' fees and costs. Trask also appeals the order appointing a receiver and argues the order allowed the receiver to violate South Carolina law.

Encore filed a cross-appeal in that same case and argues the circuit court erred in holding it was...

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