Mickalowski v. American Flooring, Inc., et al.
| Docket Number: | 2005-CA-01864-COA Linked Case(s): 2005-CA-01864-COA ; 2005-CT-01864-SCT |
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| Court of Appeals: |
Opinion Link Opinion Date: 05-29-2007 Opinion Author: LEE, P.J. Holding: Affirmed |
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| Additional Case Information: |
Topic: Contract - Covenant not to compete - Damages Judge(s) Concurring: MYERS, P.J., GRIFFIS, ROBERTS AND CARLTON, JJ. Non Participating Judge(s): IRVING, J. Dissenting Author : KING, C.J. Dissent Joined By : CHANDLER AND ISHEE, JJ. Concurs in Result Only: BARNES J. Procedural History: Bench Trial Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 08-25-2005 Appealed from: LEE COUNTY CIRCUIT COURT Judge: Sharion R. Aycock Disposition: DEFENDANT/APPELLANT VIOLATED THE TERMS OF THE NON-COMPETE AGREEMENT; PLAINTIFF/APPELLEE AWARDED $90,000 IN COMPENSATORY DAMAGES, $25,000 IN PUNITIVE DAMAGES AND $19,095.06 IN ATTORNEY’S FEES. TRIAL COURT ALSO AWARDED DEFENDANT/APPELLEE $2,622 ON DEFENDAN Case Number: CV01-286(B)L |
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| Party Name: | Attorney Name: | |||
| Appellant: | JOHN MICKALOWSKI AND JAMIE MICKALOWSKI |
GEORGE E. DENT
ANNA CATHERINE PIPKIN |
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| Appellee: | AMERICAN FLOORING, INC. AND JIM CHRESTMAN | MICHAEL LEE DULANEY |
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Synopsis provided by:  If you are interested in subscribing to the weekly synopses of all Mississippi Supreme Court and Court of Appeals hand downs please contact Tammy Upton in the MLI Press office. |
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| Topic: | Contract - Covenant not to compete - Damages |
| Summary of the Facts: | John and Jamie Mickalowski owned and operated American Flooring and Floors 4 Less, a retail ceramic tile store. The Mickalowskis entered into a contract with Jim Chrestman, whereby Chrestman agreed to purchase all of the assets of the flooring business. Chrestman paid $329,227 for the business and an additional $90,000 for the covenant not to compete. Chrestman became aware of several violations of the agreement and filed a complaint seeking injunctive relief, compensatory damages, punitive damages, attorney’s fees and expenses, and any other relief available at law or in equity. The court found that the Mickalowskis willfully violated the terms of the non-compete agreement and awarded Chrestman $90,000 in compensatory damages, $25,000 in punitive damages, and $19,095.06 in attorney’s fees. The Mickalowskis appeal. |
| Summary of Opinion Analysis: | Issue 1: Covenant not to compete Section 6.1.a.a. of the covenant not to compete allowed the Mickalowskis to engage in wholesale distribution “from time to time” with the condition that American Flooring was given the right of first refusal on the sales in Lee County. Substantial evidence exists to support the trial court’s conclusion that the Mickalowskis made retail sales through a new business, Old World Tile, and the evidence shows that their wholesale distribution exceeded the “from time to time” limitation. Section 6.1.a.b. of the agreement set out restrictions with regard to wholesale activities outside Lee County but within a fifty mile radius from the premises where the business is located. Since Chrestman had a retail presence within the restricted area, the Mickalowskis should have known that they must give notice before selling to any person or entity in the area. Issue 2: Damages The Mickalowskis argue that damages are not appropriate since they did not violate the covenant not to compete. They also argue that the damages awarded are excessive. Chrestman paid $90,000 for the non-compete clause, and the parties agreed in the purchase agreement that this was the value of the covenant not to compete. The trial court’s opinion stated that the award of $90,000 was meant to reimburse Chrestman for what he paid for the non-compete clause since the Mickalowskis wholly failed to comply with its terms. While it is apparent that Chrestman received little value for the $90,000 he paid for the covenant, the award not only reflects the price paid but also the ongoing and irreparable harm caused by the violations. The trial judge demonstrated that this was an extreme case warranting punitive damages in her statement that after executing the agreement the Mickalowskis “deliberately engaged in a course of misconduct” and “elected to totally disregard the covenant not-to-compete.” Based on the evidence, the decision of the trial court regarding damages is affirmed. |
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