Insight Technology, Inc. v. Freightcheck

• Decision Date: 20 June 2006
• Docket Number: No. A06A0710.,A06A0710.
• Citation: 280 Ga. App. 19,633 S.E.2d 373
• Parties: INSIGHT TECHNOLOGY, INC. v. FREIGHTCHECK, LLC et al.
• Court: Georgia Court of Appeals

280 Ga. App. 19

633 S.E.2d 373

INSIGHT TECHNOLOGY, INC. v. FREIGHTCHECK, LLC et al.

No. A06A0710.

Court of Appeals of Georgia.

June 20, 2006.

Bruce E. Mitchell, Clare Michaud, Mitchell & Associates, Gary Stokes, Lamberth, Cifelli, Stokes & Stout, P.A., Atlanta, for Appellant.

Morris, Manning & Martin, Alpharetta, Lawrence H. Kunin, Troutman Sanders, Laura D. Windsor, L. Matt Wilson, Dustin R. Thompson, John A. Lockett III, Atlanta, for appellees.

ELLINGTON, Judge.

Insight Technology, Inc. brought this action in the Superior Court of Gwinnett County against Darren Brewer, Patrick Hull, Get-Loaded.com, LLC, and FreightCheck, LLC. Insight asserted claims against these parties for breach of fiduciary duty, misappropriation of trade secrets, misappropriation of corporate opportunities, and fraud. Insight alleged that Brewer, who was Insight's president, and Hull secretly agreed to create FreightCheck to compete with Insight using Insight's own computer software and business practices. The trial court granted the motions for summary judgment filed by Hull, GetLoaded, and FreightCheck on all claims. The trial court granted Brewer's motion for summary judgment in part, reserving to the jury Insight's claims for breach of fiduciary duty, appropriation of corporate opportunities, punitive damages, and attorney fees. Insight appeals, contending jury issues remain on all of its claims, with the exception of its claim against Hull and GetLoaded for appropriation of corporate opportunities. For the reasons explained below, we conclude questions of material fact remain on Insight's claims against Hull, GetLoaded, and FreightCheck for procuring a breach of fiduciary duties, misappropriation of trade secrets, punitive damages, and attorney fees, and reverse the trial court's judgment in part. We affirm the remainder of the trial court's judgment.

"On appeal from the grant of summary judgment [the appellate court] conducts a de novo review of the evidence to determine whether there is a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law." (Citation and punctuation omitted.) Munroe v. Universal Health Svcs., 277 Ga. 861, 864-865(2), 596 S.E.2d 604 (2004).

Viewed in the light most favorable to Insight, the record contains evidence of the following facts. In 1996, Gary Aliengena incorporated Insight in Delaware as an internet-based freight load matching service, or "load board." Under the name NetTrans, Insight's virtual load board allowed independent truckers or small trucking companies to search online for available hauling jobs that matched their equipment and availability. The load board derived its revenue from membership fees paid both by the trucking companies and by shipping brokers and others who posted specific hauling jobs on the website. Insight also derived revenue from paid advertising on its website. GetLoaded, which Hull formed in Virginia in 1999, operated a similar virtual load board and competed with Insight.

When Aliengena created Insight, he hired Brewer to be the director of marketing. Aliengena and Brewer executed an employment agreement which required Brewer to hold in confidence Insight's trade secrets and confidential information. Despite the designated title in the employment agreement, however, Brewer was the president of Insight during his entire employment with the company. Brewer managed Insight's operations from an office in Norcross.

In 1998, Aliengena decided to expand Insight's business into freight factoring. First under the name Quick Pay, and later under the name FactorLoads, Insight paid truckers immediately on hauling invoices and then, as an assignee, collected payment from the payors, either shippers or freight brokers. Because these assignments were "without recourse," Insight accepted the risk of nonpayment or slow payment. For this service, Insight charged truckers a percentage commission on the face amount of the invoices.

For Insight's FactorLoads service, Brewer created a website, drafted forms, designed procedures, such as for evaluating the credit worthiness of particular shippers and brokers, and trained and supervised employees. In 2000, Brewer caused Insight to buy a commercially available website design program called ColdFusion and then enhanced the program with features useful in the factoring business. Only Insight employees had access to the administrative section of the FactorLoads.com website through the use of passwords.

In late 1999 or 2000, Brewer met Hull, GetLoaded's majority shareholder and "managing member." By this time, Brewer was a 20 percent shareholder in Insight. Brewer tried, unsuccessfully, to persuade Hull to accept an ad for Insight's FactorLoads service on the GetLoaded website. By late 2001, Brewer and Hull began to discuss starting a new internet factoring business together. Hull wanted to partner with Brewer because of Brewer's experience programming in the freight factoring industry. Hull incorporated a new company, FreightCheck, LLC, in Virginia. Hull also created a new company, Maverick Holdings, LLC, as the sole shareholder. Brewer created a new limited liability company, Extranet Commerce, LLC, as the sole shareholder. Hull's wholly owned company, Maverick, and Brewer's wholly owned company, Extranet, then each became 50 percent shareholders in FreightCheck. Hull provided FreightCheck's startup capital by borrowing $100,000 from GetLoaded and then lending that sum to FreightCheck. Declaring that GetLoaded was "financially interested" in FreightCheck, GetLoaded provided a guaranty of FreightCheck's obligations to an industry lender. Hull also provided a personal guaranty on some of FreightCheck's debts.

FreightCheck launched its website and began operating its factoring business, in competition with Insight, on June 1, 2002. By this time, factoring represented about 98% of Insight's total revenue of $5.3 million. Brewer rented office space for FreightCheck in an office suite down the hall from Insight's office so it would be convenient for him to visit FreightCheck's office while still employed at Insight. In the month before FreightCheck became operational, Brewer paid Insight employee Patti Burroughs to train Jeannie Yu in using the FactorPlus software and to train Insight employee Kristina Gersema to use certain accounting software and procedures used in Insight's factoring business. In April 2002, Brewer offered Gersema a job as president of FreightCheck to commence on June 1, subject to Hull's approval. According to Gersema, Brewer told her that he and Hull wanted her to be president of Freight-Check so that Aliengena would not find out about Brewer's connection to the company. FreightCheck also hired Yu. Gersema and Yu signed confidentiality agreements acknowledging that FreightCheck's computer programs, methods, processes and formulas were trade secrets.

The day it launched its business, Freight-Check's website used the customized software program Brewer developed while working for Insight, and the website was nearly identical to Insight's FactorLoads website. On its first day, FreightCheck's website even contained testimonials from "satisfied customers" which were identical to testimonials already appearing on FactorLoads.com. FreightCheck also used the same rate structure, forms, and business methods and processes Brewer developed at Insight. The parties presented conflicting evidence regarding whether Aliengena gave Brewer permission to start a new freight factoring company and to use Insight's forms, processes, methods, software and technology to compete with Insight.

Over the next 21 months, while Brewer continued working as Insight's president and supervising its employees, he spent much of his time in the FreightCheck office, managing its operations and supervising its employees. Brewer informed Hull of almost every aspect of FreightCheck's daily operations and sought Hull's approval of decisions. In November 2003, Brewer filed for copyright protection of the customized application of ColdFusion under the name FactorPlus. Immediately thereafter, Brewer on behalf of Extranet licensed the FactorPlus software both to Insight and to FreightCheck.

Aliengena, Insight's majority shareholder, was unaware of Brewer's relationship with Hull, his 50 percent ownership interest (through Extranet) in FreightCheck, or his role in FreightCheck's operations. On several occasions, Brewer told Gersema, Burroughs and other Insight employees not to tell Aliengena about his involvement in FreightCheck. Aliengena also did not know that Brewer had obtained copyright protection for the FactorPlus software or that he had licensed it to both Insight and Freight-Check in November 2003.

In early 2004, Aliengena and Brewer discussed Insight's revenues, which were "flat." Brewer urged Aliengena to sell Insight to GetLoaded. On February 6, 2004, Brewer, on behalf of Insight, and Hull, on behalf of GetLoaded, executed a bilateral nondisclosure agreement to give GetLoaded access to Insight's confidential and proprietary information. Trade secrets were defined to include, inter alia, source code, programs, and software. Then, on or about February 25, 2004, Burroughs informed Aliengena of Brewer's involvement in FreightCheck. On March 5, 2004, Hull, on behalf of GetLoaded, issued a letter of intent to Insight, offering to buy the company for $900,000, estimated to be 4.5 times earnings. Both Brewer and Hull actively concealed their ownership and participation in FreightCheck, and Freight-Check's relationship to GetLoaded. Having learned of these relationships from Burroughs, however, Aliengena fired Brewer, and Insight filed this lawsuit on March 17, 2004.

After a hearing, the trial court denied Brewer's motion for summary judgment on Insight's claims for breach of fiduciary duty, appropriation of corporate opportunities, punitive...