We Sell Resturants, Inc. v. Maddox (In re Maddox)

Docket Number22-30493-sgj7,Adversary 22-03063
Decision Date07 June 2023
PartiesIN RE: DOMINIQUE LYDELL MADDOX, Debtor. v. DOMINIQUE LYDELL MADDOX, Defendant. WE SELL RESTURANTS, INC., Plaintiff,
CourtU.S. Bankruptcy Court — Northern District of Texas
Chapter 7

FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF JUDGMENT OF NONDISCHARGEABILITY, PURSUANT TO 11 U.S.C. § 523(a)(6)

CAME ON FOR TRIAL before this court, on May 15, 2023, the above-referenced Adversary Proceeding (herein so called) in which Plaintiff seeks a determination of nondischargeability of a debt owed to it by the Chapter 7 Debtor, pursuant to section 523(a)(2), (4), and (6) of the Bankruptcy Code. Plaintiff is a national brokerage firm that retained the Debtor prepetition as an independent contractor. The parties' relationship was terminated by the Plaintiff and prepetition litigation ensued regarding the Debtor's alleged misappropriation of customers/clients and proprietary information, and Debtor's purported violation of a non-compete agreement. As explained below, the litigation became quite contentious-with a state court judge going so far as to call it "rancid." This court heard live testimony of two witnesses and was presented with 18 exhibits. Post-hearing briefing was submitted on May 26 2023. This court has determined that the prepetition debt owed by the Debtor to the Plaintiff, imposed pursuant to a final order of a Georgia state court, is excepted from discharge pursuant to section 523(a)(6). The court issues these Findings of Fact and Conclusions of Law in support of this decision, pursuant to Fed. R. Bankr. Pro. 7052. Any Finding of Fact that should more properly be characterized as a Conclusion of Law should be deemed as such, and vice versa.

I. FINDINGS OF FACT

1. The entity known as We Sell Restaurants, Inc. ("We Sell" or the "Plaintiff"), is a Georgia corporation. It is a national restaurant brokerage firm and specifically, markets restaurants to the public and brokers the sale and/or lease of restaurant space for clients. Its founder and CEO, Robin Gagnon ("Ms. Gagnon"), credibly testified that the company started in 2001 and conducts business in 45 states.

2. Mr. Dominique Lydell Maddox, the Chapter 7 Debtor ("Maddox" or the "Defendant"), while residing in the state of Georgia, was retained by the Plaintiff as an independent contractor from September 2010 to December 2013, then left the company, then came back again from January 2015 to October 2019. Maddox's responsibilities as an independent contractor included, without limitation: solicitating clients, cultivating client relationships, and working to sell, lease, and/or manage restaurant businesses listed with the Plaintiff. Maddox testified that he worked as a "restaurant broker" and for a small amount of time as a "sales development manager."

3. Ms. Gagnon credibly testified that, to protect the Plaintiff's trade secrets and proprietary systems and such, the company requires its independent contractors to sign a non-compete agreement. What is this proprietary information that the Plaintiff seeks to protect? Data such as training manuals, handbooks, customer/client lists, lead lists, presentations, draft agreements, marketing materials, business/restaurant valuation tools, etc. The form of non-compete agreement submitted into evidence referred to the Plaintiff as "Broker" and an independent contractor such as the Debtor as a "Licensee," and did, indeed, restrict or prohibit the Licensee's use of "Trade Secrets" and "Confidential Information" (both defined in the agreement). It further prohibited the Licensee from engaging in solicitation of clients or engaging in "Competitive Services." The agreement defined "Competitive Services" as follows:

activities, services or products competitive with the brokering and selling businesses and associated real property (if any), advising customers and clients with regard to site location for businesses, and provision of related consulting services, or any related activities, services or products of the type authorized, offered, provided or conducted by Broker or its affiliates within two (2) years immediately prior to the cessation of Licensee's relationship with Broker or earlier measuring date, as applicable.[1]

The agreement further defined "Restricted Territory" as follows:

(i) the entire metropolitan Atlanta area consisting of the following counties: Barrow, Bartow, Butts, Carroll, Cherokee, Clayton, Cobb, Coweta, Dawson, DeKall, Douglas, Fayette, Forsyth, Fulton, Gwinnett, Hall, Haralson, Feard, Henry, Jasper, Lamar, Meriwether, Morgan, Newton, Paulding, Pickens, Pike, Putnam, Rockdale, Spalding, and Walton and (ii) with respect to the area lying outside of the area described in (i) above, any area that lies within a fifteen (15) mile radius of any facility or location where Broker authorized, offered, provided or conducted Competitive Services within two (2) years immediately prior to the cessation of Licensee's relationship with Broker or earlier measuring date, as applicable."[2]

3. In the fall of 2015, the Plaintiff updated its form of non-compete agreement. According to the credible testimony of Ms. Gagnon, the Plaintiff did so in order to comply with Georgia state law following an incident of some sort with another independent contractor.[3] We Sell offered into evidence a copy of a non-compete agreement that shows it was signed by the Debtor on August 29, 2015.[4] In a nutshell, it prohibited Maddox from brokering or selling restaurants or providing services or products similar to that which We Sell provided for a two year period following termination of his relationship with We Sell. And Maddox was also prohibited from soliciting We Sell's current and prospective customers with whom he had material contact for the purpose of offering competitive services/products. However, the Debtor took the position in prepetition litigation,[5] and still to this day, that he did not sign the non-compete agreement, and that his signature is a forgery.

4. In the first quarter of 2019, while still an independent contractor with the Plaintiff, the Debtor purchased a URL with the name "EatsBroker.com." The Debtor confirmed this in testimony. He further testified that he did not immediately set up a webpage utilizing this URL. Maddox also testified that he personally obtained his own broker's license around this same time. Then, on October 14, 2019, Maddox notified Ms. Gagnon that he intended to leave We Sell and open a competing restaurant brokerage firm at the end of 2019. Ms. Gagnon told Maddox that doing so would be in violation of his non-compete agreement. Maddox maintained that he nonetheless planned on establishing a competing brokerage business. Ms. Gagnon immediately terminated Maddox's independent contractor relationship with We Sell and revoked his password and all access to We Sell's software, database, and other resources containing confidential, proprietary, and trade secret information. Maddox opened his own restaurant brokerage business shortly thereafter.

5. Just a few days later, on October 25, 2019, Maddox received from the Plaintiff's legal counsel a notice to immediately cease-and-desist violating his non-compete agreement.[6] Ms. Gagnon credibly testified that We Sell made the decision to send this letter after becoming aware that Maddox was advertising and promoting his competing business, and that at least one We Sell client (a Mr. Wang of "Senor Buddha") utilized the Debtor's personal brokerage services on a transaction after Mr. Wang terminated his listing agreement with We Sell.[7] Maddox did not respond to the cease-and-desist letter and continued to operate his new business. In fact, on November 6, 2019, Maddox posted on social media that he had received his broker's license and was ready to take clients.

6. On November 13, 2019, We Sell filed a complaint in the Superior Court for Fulton County, State of Georgia (the "Georgia Court") against Maddox and his new entity Eats Restaurant Brokers, LLC, seeking damages, declaratory relief, and a temporary injunction,[8] to which Maddox answered through counsel.[9]

7. The complaint alleged breach of the non-compete agreement and misappropriation and conversion of proprietary information, confidential information, and trade secrets, among other things. On November 22, 2019, the Georgia Court granted a temporary restraining order ("TRO") stating, "that the specific facts alleged in Plaintiff's Verified Petition shows that immediate and irreparable injury, loss or damage will result absent an order to maintain the Parties' status quo."[10] The TRO ordered in relevant part:

a. Defendant shall not provide competitive services of brokering and selling any business and associated real property, advising customers and clients with regard to site location for any businesses, and/or provision of related consulting services, or any related activities, services or products of the type authorized, offered, provided, or conducted by Plaintiff within two (2) years immediately prior to Defendant's termination, within the restricted territory of the entire metropolitan Atlanta area and any area that lies within a fifteen (15) mile radius of any facility or location where Plaintiff authorized, offered provided, conducted competitive services within two (2) years immediately prior to Defendant's termination. b. Defendant shall not solicit or attempt to solicit, directly or indirectly, any business from any of Broker's customers or clients, or Broker's actively sought prospective customers or clients, with whom Plaintiff had material contact during his relationship with Defendant, for the purposes of providing or offering competitive services as defined in subsection (1) above.
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