Nebo Ventures, LLC v. Novapro Risk Solutions, L.P.

• Decision Date: 19 November 2013
• Docket Number: No. A13A1324.,A13A1324.
• Citation: 324 Ga.App. 836,752 S.E.2d 18
• Parties: NEBO VENTURES, LLC v. NOVAPRO RISK SOLUTIONS, L.P.
• Court: Georgia Court of Appeals

324 Ga.App. 836

752 S.E.2d 18

NEBO VENTURES, LLC

v.NOVAPRO RISK SOLUTIONS, L.P.

No. A13A1324.

Court of Appeals of Georgia.

Nov. 19, 2013.

McKenna, Kong & Aldridge, Bruce Perrin Brown, Robert M. Martin, Atlanta, for Appellant.

Hall Booth Smith, James Willis Standard, Jr., Atlanta, for Appellee.

ANDREWS, Presiding Judge.

Nebo Ventures, LLC, sued NovaPro Risk Solutions, L.P., to recover damages for breach of contract and fraud. The trial court granted partial summary judgment to NovaPro, and Nebo appeals. For reasons set forth below, we affirm in part, reverse in part, vacate in part, and remand with direction.

It has been “well established that on appeal of a grant of summary judgment, the appellate court must determine whether the trial court erred in concluding that no genuine issue of material fact remains and that the party was entitled to judgment as a matter of law.” (Citation and punctuation omitted.) Rubin v. Cello Corp., 235 Ga.App. 250, 510 S.E.2d 541 (1998). “We review the grant of summary judgment de novo, construing the evidence in favor of the nonmovant.”(Citation omitted.) White v. Ga. Power Co., 265 Ga.App. 664, 664–665, 595 S.E.2d 353 (2004).

So viewed, the evidence shows that Nebo, a limited liability company wholly owned and managed by Kevin Miles, helped companies obtain and perform contracts with state and local governments. NovaPro, formerly known as Ward North America, L.P., was in the business of providing third-party administrative services. In 2003, NovaPro retained Nebo to assist it in selling administrative services to potential customers. By the terms of their March 2003 written contract (the “Nebo Services Agreement”), the parties agreed to designate the amount of Nebo's fees in a separate schedule for each potential customer. The Nebo Services Agreement contemplated that NovaPro would not take any action to circumvent the payment of fees to Nebo, including “causing Revenues to be paid to an entity or person other than” NovaPro, “which Revenues shall be deemed paid to” NovaPro.

In a November 2003 addendum to the Nebo Services Agreement, NovaPro and Nebo identified the City of Atlanta as a “Potential Customer.” In September 2004, the City contracted with NovaPro (the “2004 City Contract”) for the provision of certain workers' compensation, medical, healthcare, and claims management services. Consistent with the terms of the addendum, NovaPro elected to pay Nebo 5% of the adjusted gross revenues “for the life of its contract with the City of Atlanta.” NovaPro began making payments to Nebo, either directly or through Miles,¹ amounts which NovaPro represented to be 5% of its adjusted gross revenues from the 2004 City Contract.

The initial term of the 2004 City Contract was two years, with one two-year renewal option. The City and NovaPro entered into a “City–Contractor Agreement Renewal No. 1” pursuant to which the parties extended the 2004 City Contract for a two-year period beginning on October 1, 2006 and ending on September 20, 2008. After the expiration of the 2004 City Contract, as extended, the City issued a request for proposal, seeking bidders for a new contract for the provision of workers' compensation, medical, healthcare and claims management services. NovaPro won the bid and entered into a professional services agreement (the “2009 City Contract”) with the City for an initial three-year term, beginning July 1, 2009. Although NovaPro and the City were operating without a contract for a time, NovaPro performed services and recognized income from the City during that period.

Meanwhile, according to Miles, he became aware in 2009 that the City was considering terminating its contractual relationship with NovaPro. Miles e-mailed NovaPro's chief operating officer, Russ Whitmarsh, and asked that NovaPro “consider extending our agreement for 3 years ... if we are awarded the extensions by [the City of Atlanta] under the ‘new’ contract.” After several e-mail exchanges, NovaPro's officer wrote Miles “I will commit to extending your current agreement if we get the renewal.” Whitmarsh also stated that “[t]his I will put in writing” for both parties to execute, but he never did.

NovaPro continued making payments to Nebo after NovaPro and the City entered into the 2009 City Contract. In June 2011, NovaPro sold substantially all of its assets to Carl Warren & Company (“CWC”), including the rights to the 2009 City Contract. NovaPro made its last payment to Nebo in June 2011. After the asset sale to CWC, NovaPro ceased active business operations and did not receive revenues from ongoing business operations, including any revenues from the City.

Nebo believed that NovaPro's sale of the 2009 City Contract to CWC, along with NovaPro's announcement of its intent to stop paying fees under the Nebo Services Agreement, constituted a breach of NovaPro's obligation not to circumvent payment of fees to Nebo. Accordingly, Nebo sued NovaPro. In what Nebo characterizes as its “forward-looking” claims, Nebo alleged that NovaPro was in breach of the Nebo Services Agreement by refusing to pay Nebo 5% of the adjusted gross revenues of the 2009 City Contract. And in its “backward-looking” claims, Nebo alleged that NovaPro had miscalculated the 5% fee in the past and so underpaid Nebo.

Nebo later amended its complaint to assert a fraud claim arising out of allegations that NovaPro had misrepresented and concealed revenues it had received from the City in the form of performance bonuses.² During discovery NovaPro initially failed to disclose that it had received approximately $1 million in performance bonuses from the City. In 2004, NovaPro had informed Miles that the City had agreed to pay a yearly performance bonus “based upon how much we can actually save the City each year,” and that, if NovaPro actually earned a bonus, Nebo would “of course receive your 5% share of that.” When Miles asked Whitmarsh in 2008 or 2009 and NovaPro's chief financial officer, Ken Perilli, as late as 2008, about the bonuses, they each represented that no bonus had been paid. However, during the second quarter of 2005 and the second quarter of 2006, NovaPro received performance bonuses from the City of $814,501 and $348,972, respectively. NovaPro's former controller, Antoinette Turbyfill, deposed that the performance bonuses were a component of gross revenue and that she had initially failed to include the bonuses in information she supplied to NovaPro's lawyers.

After Nebo asserted its fraud claim, NovaPro moved for summary judgment. In its resulting order, the trial court found that issues of material fact remained as to whether Nebo had been fully compensated under the Nebo Services Contract and so denied NovaPro's motion as to the “backward-looking” breach of contract claims in part. It also denied summary judgment on Nebo's contractual claims for attorney fees. The trial court, however, granted summary judgment to NovaPro on (i) the fraud claims; (ii) the punitive damages claims; (iii) the “backward-looking” breach of contract claims to the extent that those claims arose outside the statute of limitation, which the trial court found to be six years before this action was filed; and (iv) the “forward-looking” breach of contract claims. Nebo appeals from this order.

1. Nebo contends that the trial court erred in granting NovaPro's motion for summary judgment as to Nebo's fraud claim. We agree.

The elements of fraud are “(1) false representation by defendant; (2) scienter [or knowledge of the alleged falsehood]; (3) intent to induce the plaintiff to act or refrain from acting; (4) justifiable reliance by the plaintiff; and (5) damage to the plaintiff.” Lakeside Investments Group v. Allen, 253 Ga.App. 448, 450, 559 S.E.2d 491 (2002). See Dasher v. Davis, 274 Ga.App. 788, 789, 618 S.E.2d 728 (2005) (accord). The absence of one or more of these elements will sustain a grant of summary judgment to the defendant. See id. at 790, 618 S.E.2d 728. Nevertheless, “slight circumstances may be sufficient to carry conviction” of the existence of fraud. (Citation omitted.) Everson v. Franklin Discount Co., 248 Ga. 811, 812, 285 S.E.2d 530 (1982).

Here, the trial court found as a matter of law that Nebo was not justified in relying on NovaPro's representations regarding the nonpayment of the performance bonuses. For the reasons discussed below, we disagree and conclude that the issue should be resolved by a jury. However, virtually every element of Nebo's fraud claim is in dispute, and “a judgment right for any reason will be affirmed on appeal.” (Citation and punctuation omitted.) R.W. Holdco, Inc. v. Johnson, 267 Ga.App. 859, 866(2)(b), 601 S.E.2d 177 (2004). Accordingly, we will address each element of Nebo's fraud claim in turn.

(a) The City paid NovaPro more than $1 million in performance bonuses in 2005 and 2006. Under the terms of the Nebo Services Contract, and as acknowledged by Perilli, Nebo was entitled to a “5% share” of those monies. According to Miles, in responseto his later inquiry about the bonuses, Perilli and Whitmarsh denied that any bonuses had been paid. Viewed in a light most favorable to Nebo, there is evidence that NovaPro made a false statement.

Further, NovaPro's alleged misrepresentation can be distinguished from a mere breach of contract. In Georgia, “a tort action cannot be based on the breach of a contractual duty only, but it can be based on conduct which, in addition to breaching a duty imposed by contract, also breaches a duty imposed by law.” (Citations and punctuation omitted.) Young v. W.S. Badcock Corp., 222 Ga.App. 218, 219(1), 474 S.E.2d 87 (1996). Georgia law recognizes a right to recover for a “[w]illful misrepresentation of a material fact, made to induce another to act, upon which such person acts to his injury,” OCGA § 51–6–2, and a breach of the duty imposed thereby would afford Nebo a right of action for fraud notwithstanding that NovaPro's nonpayment of fees due on account...