United Laboratories, Inc. v. Kuykendall
| Decision Date | 03 December 1993 |
| Docket Number | No. 243PA91,243PA91 |
| Citation | 437 S.E.2d 374,335 N.C. 183 |
| Parties | , 9 IER Cases 34 UNITED LABORATORIES, INC., a Delaware Corporation v. William Douglas KUYKENDALL and Share Corporation, a Wisconsin Corporation. |
| Court | North Carolina Supreme Court |
On discretionary review pursuant to N.C.G.S. § 7A-31 of a unanimous decision of the Court of Appeals, 102 N.C.App. 484, 403 S.E.2d 104 (1991), affirming in part, reversing and remanding in part a judgment entered by Owens, J., on 19 July 1989 in Superior Court, Buncombe County. Heard in the Supreme Court 11 March 1992.
Petree Stockton by Jackson N. Steele, Charlotte, Schwartz & Freeman by Paul G. Simon and Jamie A. Maloney, Chicago, IL, for plaintiff-appellee.
Brock, Drye & Aceto, P.A. by Michael W. Drye, Ashville, for defendant-appellant Share Corp.
We allowed defendant Share Corporation's petition for discretionary review in order to consider whether and to what extent a claimant who successfully prosecutes both a common law claim and an unfair practices claim under Chapter 75 of our General Statutes is required to elect between remedies when both claims arise out of essentially the same conduct.
This case has occupied the parties and the courts for a number of years. The essence of it is that plaintiff, United Laboratories, Inc. (United), employed defendant Kuykendall to sell chemical products. The employment contract provided that Kuykendall would not call upon accounts which he serviced for United for eighteen months after his termination of employment with United. Defendant Share Corporation (Share), a competitor of United, induced Kuykendall to leave his employment with United in order to work as a sales representative for Share under circumstances which amounted to a breach of Kuykendall's non-competition agreement with United.
United filed this action against Kuykendall and Share in November 1985, claiming that Kuykendall had breached his non- competition agreement, that Share had tortiously interfered with this agreement, and that Share had violated North Carolina's unfair practices law, codified in Chapter 75 of our General Statutes. At the first trial United, after having obtained a preliminary injunction against Kuykendall, also obtained directed verdicts against Kuykendall for breach of contract and against Share for tortious interference with contract and for violating the unfair practices law. A jury assessed general damages in favor of United in the amount of $77,477.77, which the trial court reduced to $38,738.89. The jury also found that United had incurred attorneys' fees and costs in the amount of $47,522.23, and the trial court entered judgment that defendants pay United this amount for its attorneys' fees and costs. The trial court also permanently enjoined Kuykendall from further violations of his agreement with United.
On defendants' first appeal this Court, reversing the Court of Appeals, concluded that the non-competition agreement was enforceable. United Laboratories, Inc. v. Kuykendall, 322 N.C. 643, 370 S.E.2d 375 (1988). We also concluded that the trial court erred in directing a verdict in favor of United in its tortious interference claim and that the Court of Appeals erred in concluding that a directed verdict should have been entered on this claim for defendant Share. We held this claim should have been submitted to the jury for determination. Id. We affirmed the Court of Appeals' decision to remand the case for a new trial on United's unfair practices claim, agreeing that it was error for the trial court to direct a verdict in favor of United on this claim. 1
At the retrial of the case issues were submitted and answered by the jury as follows:
(1) What amount of damages is Plaintiff United entitled to recover of Defendant Kuykendall for breach of the Sales Representative Agreement and Supplemental Compensation Agreement?
(2) Did Defendant Share unjustifiably induce Kuykendall not to perform his contract with United?
(3) What amount of damages, if any, is Plaintiff United entitled to recover of Defendant Share?
(4) In your discretion, what amount of punitive damages, if any, should be awarded to Plaintiff United from Defendant Share?
(5) Did Defendant Share do one or more of the following:
a. Offer to pay legal fees and costs to induce Kuykendall, in breach of his covenant not to compete, to attempt to divert to Share, unfairly, United's accounts;
b. Induce Kuykendall to use his relationship with United's accounts and knowledge of confidential business information to attempt to divert to Share, unfairly, United's accounts;
c. Offer to subsidize the income, draw and expenses of Kuykendall in the event of an injunction, to induce Kuykendall, to divert to Share, unfairly, United's accounts;
d. As a matter of routine practice, offer to pay legal fees and costs to induce experienced chemical sales representatives, in breach of the salesmen's covenant not to compete, to attempt to divert to Share, unfairly, the former employer's accounts.
(6) Was Defendant Share's conduct in commerce or did it affect commerce?
(7) Was Defendant Share's conduct a proximate cause of any injury to Plaintiff United's business?
(8) By what amount, if any, has the business of Plaintiff United been injured?
Upon the coming in of the verdict, all parties seemed to agree that it was then a question of law for the trial court to determine whether defendant Share's conduct as found by the jury constituted a violation of the unfair practices law. 2 After the verdict was returned on 26 May 1989, the parties exchanged evidence pertaining to the issue of attorneys' fees and prepared for a posttrial hearing before Judge Owens on the question of whether Share's conduct as found by the jury amounted to a violation of the unfair practices law and, if so, what amount of attorneys' fees should be awarded to United. After the posttrial hearing on 5 July 1989 Judge Owens concluded that Share's conduct as found by the jury in Issue 5 constituted "unfair methods of competition and unfair trade practices in violation of N.C.G.S. § 75-1.1, and that plaintiff's damages found by the jury in Issue 8 shall be trebled pursuant to N.C.G.S. § 75-16." Judge Owens concluded further that Share "willfully engaged in the acts and practices which are the subject of this action and that there was an unwarranted refusal by [Share] to resolve the matter." Judge Owens found that United was entitled to recover from Share reasonable attorneys' fees in the amount of $250,000 pursuant to N.C.G.S. § 75-16.1. Judge Owens entered these conclusions as recitations in a "Judgment and Order" which further provided as follows:
Plaintiff United Laboratories, not being permitted to recover both punitive damages and treble damages for unfair methods of competition and unfair trade practices, shall, within ten days of the filing of this Judgment, file a Motion in this cause electing between the recovery of punitive damages or the recovery of treble damages.
NOW, THEREFORE, it is hereby ORDERED, ADJUDGED and DECREED:
That within ten days of the filing of this Judgment, plaintiff shall file a Motion in this cause electing between the recovery of punitive damages or the recovery of treble damages[.] 3
By motion in the cause filed 12 July 1989 United elected to recover from Share on its unfair practices claim $15,000 compensatory damages and attorneys fees and on its tortious interference claim, punitive damages of $100,000.
Judge Owens' final judgment, filed 19 July 1989, after reciting United's election, adjudged that United was entitled to recover against defendant Kuykendall $11,700 and against defendant Share $15,000. The judgment then provided as follows:
[United's] compensatory damage recovery from defendant William Douglas Kuykendall and from defendant Share Corporation arises out of the same or similar circumstances and that plaintiff United Laboratories is entitled to a compensatory damage recovery of $15,000.00, with defendants William Douglas Kuykendall and Share Corporation being jointly and severally liable for $11,700.00 of such recovery, and defendant Share Corporation being solely responsible for the balance of $3,300.00[.]
Judge Owens further decreed that United should recover of defendant Share punitive damages in the amount of $100,000 and reasonable attorneys fees in the amount of $250,000 as part of the costs.
Defendants' motion to amend the final judgment so as to require plaintiff to make "a proper election of remedies" was denied. Defendant Share appealed from the final judgment and the order denying the motion to amend the judgment, assigning error to, among other things, the trial court's (1) allowing plaintiff to recover both punitive damages under its common law interference with contract claim and compensatory damages, untrebled, and attorneys fees under its statutory unfair practice claim; (2) failing to make findings in support of its award of attorneys fees; and (3) awarding attorneys fees in the absence of any evidence supporting the trial court's finding that Share willfully engaged in the conduct which was the subject of the unfair practices claim and engaged in an unwarranted refusal to resolve the matter as required by N.C.G.S. § 75-16.1.
The Court of Appeals affirmed the trial court's judgment as to the manner in which it handled the election of remedies issue. It also concluded that there was ample evidence in the record to support the trial court's finding that Share willfully engaged in the conduct which the trial court found violated the unfair practices law and that Share engaged in an unwarranted refusal to resolve the matter which constituted the basis of United's unfair practices claim. The Court of Appeals, consequently, held that the trial court did not abuse its discretion in its...
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