Cain v. Cain and Lakeview Nursing Ctr.
| Docket Number: | 2005-CA-00251-COA Linked Case(s): 2005-CA-00251-COA |
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| Oral Argument: | 03-28-2007 | |
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| Court of Appeals: |
Opinion Link Opinion Date: 06-26-2007 Opinion Author: CHANDLER, J. Holding: Affirmed in Part, Reversed and Remanded in Part |
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| Additional Case Information: |
Topic: Contract - Directed verdict - Breach of covenant not to hire - Prejudgment interest - Attorney’s fees - M.R.C.P. 11(b) - Punitive damages - Lost profits Judge(s) Concurring: KING, C.J., LEE AND MYERS, P.JJ., IRVING, GRIFFIS, BARNES AND ISHEE, JJ. Concurs in Result Only: ROBERTS AND CARLTON, JJ. Procedural History: Jury Trial Nature of the Case: CIVIL - CONTRACT |
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| Trial Court: |
Date of Trial Judgment: 09-10-2004 Appealed from: Harrison County Circuit Court Judge: Kosta N. Vlahos Disposition: AFTER JURY VERDICT FOR PLAINTIFF, COURT DENIED PLAINTIFF PREJUDGMENT INTEREST AND ATTORNEYS FEES AND DEFENDANT'S MOTION FOR NEW TRIAL OR JNOV. Case Number: A-2401-98-497 |
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| Party Name: | Attorney Name: | |||
| Appellant: | H. TED CAIN D/B/A QUEST REHAB |
DARREN E. GRAY
JOHN R. REEVES |
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| Appellee: | BRIAN CAIN AND LAKEVIEW NURSING CENTER | JOHNNY L. NELMS J. HENRY ROS |
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| Topic: | Contract - Directed verdict - Breach of covenant not to hire - Prejudgment interest - Attorney’s fees - M.R.C.P. 11(b) - Punitive damages - Lost profits |
| Summary of the Facts: | H. Ted Cain d/b/a Quest Rehab sued Brian Cain and Lakeview Nursing Center for breach of a contract requiring Quest to provide rehabilitation therapy services to Lakeview. The jury awarded Quest compensatory damages in the amounts of $86,752 for services rendered and $62,500 for lost profits. The trial court ordered Lakeview to pay post-judgment interest. Quest appeals, and Lakeview cross-appeals. |
| Summary of Opinion Analysis: | Issue 1: Directed verdict Quest argues that the court erred by directing a verdict for Lakeview on the issue of Lakeview's breach of a covenant not to hire Quest's employees during the contract or for two years after the termination of the contract. The contract contained a covenant not to hire placing restraints on Lakeview's ability to hire employees. The covenant not to hire also limited the employment opportunities of those employees covered by the contract language. Non-competition agreements are valid only within such territory and during such time as may be reasonably necessary for the protection of the employer or principal, without imposing undue hardship on the employee or agent. Lakeview argues that there could be no breach of contract because Innovative, not Lakeview, hired the Quest employees. As the administrator and sole stockholder of Lakeview and a fifty-percent partner in Innovative, Brian Cain was an agent for both Lakeview and Innovative. There was testimony from Ted Cain that he visited Brian at his Lakeview office and discussed the hiring of Quest employees. Ted stated that he told Brian his hiring of Quest employees was a breach of the contract and Brian responded that he was going to hire the Quest employees anyway. Ted's testimony presents a fact question as to whether Brian, on behalf of Lakeview, used Innovative to hire Quest employees to work at Lakeview. The contract stated that, for a specified period of time, Lakeview was not to hire, entice to hire, or induce to hire Quest's employees "by any means whatsoever, either directly or indirectly." From the evidence presented, a jury reasonably could find that Brian directed Innovative's hiring of Quest employees, did so on behalf of Lakeview, and that his conduct breached the covenant barring Lakeview from indirectly or by any means whatsoever hiring, inducing to hire, or enticing to hire Quest's employees. Lakeview argues that the covenant was ambiguous as to which Quest employees were subject to the restriction. Lakeview points out that the covenant only stated that Quest's "employees are valuable assets" and, later, referred to the covered employees as "personnel employed by [Quest]." These terms were ambiguous because it is impossible to discern if they embraced all past, present, or future Quest employees, or only persons who were employed by Quest at the inception of the contract, or persons employed by Quest any time during the term of the contract. Moreover, in the absence of specificity as to which individuals were limited by the covenant not to hire, the covenant operates as an unreasonable restraint on trade. Therefore, the court properly granted a directed verdict on this issue. Issue 2: Prejudgment interest Quest argues that the court erred in denying its request for prejudgment interest on the $86,752 which the jury awarded for services rendered. The trial judge possesses the authority to award prejudgment interest to the prevailing party in a breach of contract suit if prejudgment interest was requested in the complaint. The court may award prejudgment interest when damages are liquidated when the claim is originally made or when there has been a bad faith denial of payment. Liquidated damages are those which are set or determined by the contract when the breach occurred; unliquidated damages are those which have been established by a verdict or award but cannot be determined by a fixed formula, so they are left to the discretion of the judge or jury. Quest requested prejudgment interest in its complaint. Brian Cain admitted that the outstanding amount shown by the bills reflected the contract rates. Lakeview never disputed the finance charges. The jury awarded the outstanding amount reflected by the bills which Lakeview admitted was due under the contract. The contract did not provide for finance charges and the propriety of finance charges under the contract was not placed in dispute by the parties. The $86,752 was the amount undisputedly owed under the contract rates. Therefore, the damages for services rendered were liquidated, and the court erred by denying prejudgment interest. Issue 3: Attorney’s fees Quest argues that the court erred by denying attorney’s fees. Attorney's fees are recoverable if allowed in a contract. Absent statutory or contractual provisions, attorney's fees are not recoverable unless punitive damages are also proper. The contract language in this case cannot support the conclusion that the parties agreed Lakeview would pay Quest's attorney's fees if Lakeview breached the contract. Lakeview's contractual obligation to pay Quest was not a performance of services under the contract. Therefore, the indemnity provision did not encompass attorney's fees for Lakeview's breach of the contract by failing to pay Quest. Quest also argues that it was entitled to attorney's fees for defending the counterclaim under M.R.C.P. 11(b) and the Litigation Accountability Act because Lakeview's withdrawal of the counterclaim shows it was interposed for delay or harassment and Lakeview expanded the proceedings unnecessarily. Under Rule 11, a claim is frivolous only when, objectively speaking, the pleader or movant has no hope of success. The fact that an argument is wrong or untimely does not necessarily render the argument frivolous. Lakeview contends that with the counterclaim it planned to show that on another occasion Ted Cain had entered into a written contract with a nursing home and had orally modified the contract, then sued the nursing home asserting the written contract. The trial court refused to hear Lakeview's discussion of Quest's contract with the other nursing home and Lakeview voluntarily withdrew the counterclaim. While Lakeview's claim was weak, objectively speaking, Lakeview did not have no hope of success such that the trial court's denial of sanctions was an abuse of discretion. Issue 4: Punitive damages Quest argues it is entitled to punitive damages because Lakeview tortiously breached the contract by terminating Quest's services without the requisite notice and without just cause. For entitlement to punitive damages in a breach of contract case, the plaintiff must show by a preponderance of the evidence that the breach was the result of an intentional wrong or that the defendant acted maliciously or with reckless disregard of the rights of the plaintiff. There is nothing about this case to indicate Lakeview acted maliciously or with reckless disregard for Quest's rights such that the breach rose to the level of an independent tort. This was an ordinary breach of contract case for which punitive damages are inappropriate. Issue 5: Lost profits Lakeview argues that the court erred by admitting Quest's evidence of lost profits, which consisted of the testimony of its accountant and chief financial officer, because his calculation of lost profits was based upon speculation and conjecture and should not have been admitted into evidence. A party seeking to recover for lost profits in a breach of contract case must establish the claim with reasonable certainty. A party cannot recover for lost profits if the award is based upon mere speculation and conjecture. Damages are speculative only when the cause is uncertain, not when the amount is uncertain. In this case, the accountant’s testimony laid a sufficient foundation to enable the jury to reach a fair and reasonable estimation of damages for lost profits. |
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