Harllee v. Professional Service Industries, Inc.

• Decision Date: 01 December 1992
• Docket Number: No. 89-2650,89-2650
• Citation: 619 So.2d 298
• Parties: 17 Fla. L. Week. D2672 John W. HARLLEE and ATEC Associates, Inc., Appellants/cross-appellees, v. PROFESSIONAL SERVICE INDUSTRIES, INC., Appellee/cross-appellant.
• Court: Florida District Court of Appeals

Page 298

619 So.2d 298

17 Fla. L. Week. D2672

John W. HARLLEE and ATEC Associates, Inc., Appellants/cross-appellees, v. PROFESSIONAL SERVICE INDUSTRIES, INC., Appellee/cross-appellant.

No. 89-2650.

District Court of Appeal of Florida Third District.

Dec. 1, 1992.

As Amended on Denial of Rehearing, Rehearing En Banc and

Certification June 8, 1993.

Fowler, White, Burnett, Hurley, Banick & Strickroot and Ronald J. Marlowe, for appellants.

Goldstein & Tanen, and Susan E. Trench, for appellee.

Before COPE, LEVY and GERSTEN, JJ.

ON REHEARING GRANTED

PER CURIAM.

We grant the appellants' motion for rehearing, withdraw this court's prior opinion, and substitute the following opinion.

John W. Harllee and ATEC Associates, Inc., appeal a final judgment entered against them for tortious interference with business and contractual relationships. Professional Service Industries, Inc., cross-appeals denial of its claim for punitive damages. We reverse as to the main appeal and affirm as to the cross-appeal.

For 36 years, Harllee worked for a firm known as Pittsburgh Testing Laboratory ("PTL"), which was in the business of providing engineering and scientific testing services for private and governmental entities. Harllee was regional vice president for the Florida operations of PTL.

In January, 1987 PSI acquired PTL. PTL was merged into PSI, so that PSI was the surviving entity.

According to the trial court's findings of fact:

In April, 1987, a meeting of officers and key personnel of Plaintiff, PSI, was held in Dallas, Texas, to discuss the merger of PTL and PSI and change of corporate policies resulting from the merger.

At the Dallas meeting, three important changes, affecting employees, were announced by the new owners: (1) abolition of the existing defined benefit pension plan, (2) reduction of sick leave days, and (3) elimination of employer paid health insurance coverage for dependents. After these changes were brought to the attention of Plaintiff's personnel, employee discontent and dissatisfaction developed in all of the Florida offices of Plaintiff.

(R. 573) (emphasis added).

Not surprisingly, the employees began to question what sort of future lay ahead for them with PSI. At the end of May, 1987, Harllee agreed to open a Florida office for ATEC, a company which was a competitor of PSI but did not have a Florida presence.

During early June, 1987, word leaked out that ATEC was about to open operations in Florida. In mid-June, codefendants Steven Anderson and Bennett E. Laughlin left PSI and opened offices for ATEC. At the end of June, Harllee gave two weeks notice. In response, PSI fired him immediately. Harllee then began work for ATEC.

During June, 57 employees gave notice. These were for various departure dates extending into mid-July, 1987. PSI management made efforts to persuade the resigning employees not to leave, but those efforts were unsuccessful. The resigning employees joined ATEC.

PSI responded with a suit against Harllee, three coworkers (Michael H. Straube, Steven Anderson, and Bennett E. Laughlin), and ATEC for the following:

I. Tortious interference with business relationships.

II. Tortious interference with contractual relationships. ¹

III. Breach of fiduciary duty.

IV. Conversion.

V. Civil theft.

According to the trial court:

Counts I and II allege, in substance, that Defendants John W. Harllee, Michael H. Straube, Steven Anderson and Bennett E. Laughlin (hereinafter referred to as Harllee, Straube, Anderson and Laughlin), individually and on behalf of Defendant Atec Associates, Inc. (hereinafter referred to as ATEC), solicited Plaintiff's customers and employees while still in Plaintiff's employ.

Count III alleges Defendants Harllee, Straube, Anderson and Laughlin solicited Plaintiff's customers for their own business while in Plaintiff's employ.

Counts IV and V allege conversion and civil theft by the individual Defendants of Plaintiff's customer files, customer lists, client files, and other personal property, including tools and equipment.

After bench trial, the court found against Harllee and ATEC on counts I and II only. Harllee's coworkers were exonerated on all counts, and Harllee and ATEC were exonerated on counts III, IV, and V. Judgment was entered against Harllee and ATEC on counts I and II, and they have appealed.

The elements of tortious interference with a business relationship are:

(1) The existence of a business relationship, not necessarily evidenced by an enforceable contract (2) knowledge of the relationship on the part of the defendant;

(3) an intentional and unjustified interference with the relationship by the defendant; and

(4) damage to the plaintiff as a result of the breach of the relationship.

Tamiami Trail Tours, Inc. v. Cotton, 463 So.2d 1126, 1127 (Fla.1985).

The tort law does not, however, create a general immunity from competition. Instead, "it is only direct and unjustified interference that is actionable." Perez v. Rivero, 534 So.2d 914, 916 (Fla. 3d DCA 1988) (citation omitted).

A former employee is free to compete against a former employer (absent a noncompetition agreement to the contrary). ² Renpak, Inc. v. Oppenheimer, 104 So.2d 642, 645 (Fla. 2d DCA 1958). It is also settled that "an employee does not violate his duty of loyalty when he merely organizes a corporation during his employment to carry on a rival business after the expiration of his employment." Fish v. Adams, 401 So.2d 843, 845 (Fla. 5th DCA 1981).

Harllee and ATEC contend that the trial court misapprehended the controlling legal principles and that there is an absence of substantial competent evidence to support the judgment. We agree.

In counts I and II, PSI claimed that Harllee solicited PSI's customers and employees before Harllee left PSI. This boils down to consideration of the 30-day period between Harllee's reaching agreement with ATEC on May 29 and his actual departure on June 29.

The trial court made the following specific finding:

While there is no direct evidence that Harllee, during his employment with Plaintiff, actively solicited Plaintiff's customers or his co-employees to work for ATEC, Harllee's other actions on behalf of ATEC were further evidence of his breach of loyalty to Plaintiff: While still in Plaintiff's employ, Harllee opened a bank account in Jacksonville and orchestrated the acquisition of office space and telephone listings and services for ATEC.

In other words, the court expressly found that Harllee had not solicited employees or customers. The court concluded, however, that liability could be imposed for the actions identified in the second sentence: opening a bank account and acquiring office space and telephones. The court reasoned that these steps (as well as the entire idea of opening a Florida office for ATEC) were disloyal and therefore actionable.

As Fish v. Adams, explains, however, mere preparation to open a competing business does not violate the employee's duty of loyalty and does not constitute tortious interference. 401 So.2d at 845. Opening a bank account and obtaining office space and telephone service are acts of mere preparation and do not constitute intentional interference with a business relationship. ³

The trial court also ascribed to Harllee a subjective intent that PSI's "employees quit as a group and go to work for ATEC immediately, en masse." Findings in Nonjury Trial, at R. 576. As a preliminary matter, the evidence does not support the implication that the employees simultaneously resigned or walked out en masse. As already stated, the employees left at varying dates in June and July, after giving customary notice. After Harllee's discharge, PSI management tried to persuade the employees to remain with PSI but the employees declined to do so.

In any event, Harllee's subjective state of mind--his hope or desire that PSI employees join ATEC--is not actionable. Several of Harllee's co-employees had already resigned to open the ATEC office. Harllee may have hoped that others would join ATEC, but as long as he refrained from impermissible solicitation--and the court found that Harllee did not engage in solicitation of customers or employees--then there is no basis for liability.

PSI relies heavily on evidence said to constitute an illegal solicitation of PSI customer Gordon Smith, which consisted of a conversation and letter to Smith from Michael H. Straube, a former PSI manager. Straube was a defendant in the lawsuit and the trial judge entered judgment in Straube's favor. ⁴

The reason the trial judge exonerated Straube is because the conversation did not occur, and the letter was not sent, until after Straube left PSI's employ. At trial Gordon Smith testified that he was not certain when Straube had spoken with him and acknowledged that Straube may have already departed PSI at the time the conversation took place. Straube testified unequivocally that the conversation took place after he left PSI. Similarly, the uncontroverted testimony regarding the solicitation letter was that although the letter was dated June 29, 1987, Straube did not actually send it, nor did Gordon Smith receive it, until after Straube left PSI. Straube and Smith both agreed on this. It was, of course, permissible for Straube to contact Gordon Smith after he left PSI.

Obviously the trial judge believed Straube, because he entered judgment in Straube's favor on the tortious interference claims. Since Straube was exonerated with respect to both the conversation and the letter, the same conversation and the same letter cannot be used to impose liability on Harllee and ATEC. Even if that were not so, there is no finding of any involvement by Harllee or ATEC in the conversation with, or the letter to, Gordon Smith.

PSI argues that the judgment should be affirmed on the basis that defendants stole trade secrets. Those allegations were not part of counts I and II but were part of counts IV and V, for conversion and civil...