The opinion
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
November 16, 2006 Session
INTERMODAL CARTAGE COMPANY, INC. v. TIMOTHY CHERRY, ET
AL.
Appeal from the Chancery Court for Davidson County
No. 02-2651-II Carol McCoy, Chancellor
No. M2005-01635-COA-R3-CV - Filed on March 28, 2007
This case concerns an employment agreement entered into by employees of a company. The
employment agreement contained provisions against solicitation and competition. Four employees
who signed the agreement later left the company and went to work for one of its main competitors.
The company leveled numerous allegations against the four employees and their new employer,
including breach of the employment agreement, breach of duty of loyalty, unlawful inducement of
breach of contract, and tortious interference with contractual relations and business relations. The
trial court granted summary judgments in favor of the four employees and their new employer. The
judgment of the trial court is reversed and the case remanded for further proceedings.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Reversed and
Remanded
WILLIAM B. CAIN , J., delivered the opinion of the court, in which WILLIAM C. KOCH , JR., P.J., M.S.,
and PATRICIA J. COTTRELL, J., joined.
James M. Simpson, Heather W. Fletcher, Memphis, Tennessee, for the appellant, Intermodal Cartage
Company, Inc.
Fred Steltemier, Franklin, Tennessee, for the appellee, Timothy James Cherry.
Michael G. Derrick, R. Joseph Leibovich, for the appellee, Delta Depot/Delta Express, LLC.
Robert T. Vaughn, Nashville, Tennessee, for the appellee, Charles Pate.
John M. Cannon, Goodlettsville, Tennessee, for the appellees Dennis Etheridge and Gregory Zirock.
OPINION
I. FACTUAL BACKGROUND
Intermodal Cartage Company, Inc. (“Appellant” in this opinion, “IMC” in internal business
documents and lower court proceedings) is a trucking company dealing in the highly competitive
containerized cargo transportation business. Appellant has locations in several states, with two in
Tennessee, located in Memphis and Nashville. Delta Depot/Delta Express, LLC (“Delta”) is a direct
competitor of Appellant, also dealing in the containerized cargo transportation business. As
Appellant and Delta are direct competitors, they have several of the same customers, including
Office Max, American President Lines (“APL”), and Yang Ming Lines (“Yang Ming”). Four of
Appellant’s previous employees are at issue in this case: Appellee Tim Cherry (“Cherry”) was the
regional Vice President, Appellees Dennis Etheridge (“Etheridge”) and Charles Pate (“Pate”) were
dispatchers, and Appellee Gregory Zirock (“Zirock”) was a customer service representative.
As employees of Appellant, Cherry, Etheridge, Pate, and Zirock all signed Employment
Agreements. The Employment Agreements provided in relevant part as follows:
2. BEST EFFORTS OF EMPLOYEE: The Employee shall devote his or her full time
and service to said employment and shall faithfully perform all duties normally
incident to said employment or as otherwise directed by IMC. Employee shall not,
during the term hereof, perform any services for, or be interested, directly or
indirectly, in any manner, as a partner, officer, director, stockholder, advisor,
consultant, employee or in any other capacity in any business similar to IMC’s
business, without first obtaining the written consent of IMC. Employee agrees to
observe and conform to the policies and directions established by the management
of IMC, and that all duties on behalf of IMC shall be performed in a manner
consistent with all pertinent governmental laws, rules, and regulations, it being
specifically understood that IMC does not condone any illegal activity whatsoever
and that activity which contravenes any such law, rule or regulation is completely
unauthorized by IMC and entirely outside the scope of Employee’s employment.
3. CONFIDENTIAL AND PROPRIETARY INFORMATION: The Employee
acknowledges that information pertaining to IMC’s customers, drivers, owner-
operators, rates, pricing, business procedures, patents, and other proprietary
information constitute valuable and unique assets of IMC’s business, and that the
disclosure of this information to unauthorized persons would cause IMC irreparable
harm. The Employee covenants that he or she will not, either during or at any time
after the termination of Employee’s employment with IMC, utilize any confidential
or proprietary information, nor in any manner disclose, for any purpose, confidential
or proprietary information to any person, business or other entity. Employee
promises not to make or utilize copies of IMC’s confidential and proprietary
information except for the use and benefit of IMC and, upon termination of
employment, Employee will promptly return all IMC documents and materials
developed or obtained by Employee during employment by IMC. Information which
is published outside IMC or otherwise publicly available is not considered
confidential or proprietary.
4. NON-COMPETITION: The Employee will not, directly or indirectly, for a period
of one year following Employee’s resignation from employment or termination by
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IMC for cause, solicit trucking, warehousing, storage, maintenance, equipment
management, or other intermodal transportation services from
(1) the present customers of IMC; with the term “present customers”
agreed to mean customers who have utilized IMC’s services within
a one year period preceding the termination of Employee’s employment; or
(2) prospective customers to whom the Employee has directed written
or verbal sales solicitations within a one year period preceding the
termination of Employee’s employment;
Employee acknowledges that the restrictions and obligations set forth and imposed
herein will not prevent Employee from obtaining gainful employment in Employee’s
field of expertise or cause Employee undue hardship, and that the restrictions
imposed herein are reasonable and necessary to protect the legitimate business
interests of IMC.
5. NON-SOLICITATION OF EMPLOYEES OR OWNER-OPERATORS: Employee
agrees that for a period of one year following the termination or expiration of this
agreement, Employee will not, directly or indirectly, solicit for employment or other
contractual arrangement, or otherwise encourage the departure of any employee
working for IMC, or of any truck owner-operator who contracted with IMC during
Employee’s employment.
Cherry, Etheridge, Pate, and Zirock all received pay increases in consideration for signing their
respective Employment Agreements.
The individual Appellee employees all resigned from Appellant within less than two weeks
of each other. Cherry resigned employment from Appellant on August 7, 2002. Zirock resigned on
August 12, Etheridge resigned on August 13, and Pate resigned on August 18. The specific details
behind these resignations have become one of the main issues in this case. Of course, Appellant’s
account of the facts differ significantly from Appellees’.
Appellant alleges the facts as follows: When Cherry was its employee, his responsibilities
included sales, operations, and office administration in the Nashville office. One of the main aspects
of his position centered on customer relations: developing relationships with potential and existing
customers by calling them on the phone, taking them to dinner and/or lunch, taking them to play
golf, providing tickets to sporting events and concerts, etc. Because of these contacts, Cherry
developed close and personal relationships with several of Appellant’s customers, including APL,
Office Max, and Yang Ming. Further, as a result of his position with Appellant, Cherry had
knowledge of Appellant’s confidential business matters, specifically, the identity of customers, the
identity of drivers, business procedures, tariff and pricing structures, etc. Etheridge’s main
responsibility when employed by Appellant was dispatching owner-operator drivers, and he
maintained good relationships with the drivers. Pate was the dispatch supervisor, and established
good will with Appellant’s customers. Zirock worked for Appellant as a customer service
representative, maintaining extensive contact with Appellant’s customers. One of his main job
duties was to solicit business for Appellant. He also had knowledge of pricing structure and service
methods.
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Appellant alleges that in July of 2002, Lou Hazel (“Hazel”), the president and CEO of Delta,
contacted Cherry to discuss employment opportunities with Delta, as the company was considering
opening a terminal in Nashville. After the two met, Hazel also contacted Zirock, Etheridge, and Pate
to discuss employment opportunities. All four of these employees of Appellant faxed copies of their
Employment Agreements to Hazel. Following the initial contacts, Cherry, Etheridge, Pate, and
Zirock began conducting closed door meetings, on Appellant’s time and premises, several times a
week. Cherry informed a coworker, Selena Hunt (“Hunt”), that he had offered jobs at Delta to
Zirock, Etheridge, and Pate, and asked her if she would be interested in working for Delta.1 If these
allegations are true, such solicitation by Cherry would directly conflict with his Employment
Agreement. On August 6, 2002, Cherry and Pate traveled to Jackson, Tennessee, to meet with
Hazel. Shortly thereafter, all four employees resigned employment from Appellant.
Appellant alleges that immediately after the four began working for Delta, they also began
taking steps to solicit Appellant’s major customers and owner-operator drivers. For instance, while
employed by Appellant, Cherry and Pate had established valuable good will with Office Max. After
they were approached by Hazel, but before resigning from Appellant, Cherry and Pate visited Office
Max’s offices in Cleveland, Ohio. Also during this time, Hazel approached Kenny Spevak
(“Spevak”), the Director of International Logistics for Office Max, in an attempt to persuade him to
switch carriers from Appellant to Delta. Spevak told Hazel to assemble the people and drivers to
handle the business; Office Max named Pate specifically as the individual working for Appellant
who knew how to handle its business. Also, with respect to drivers, Spevak informed Hazel that as
a condition of handling the Office Max account, Delta would have to hire Harold Hulsey (“Hulsey”),
a driver for Appellant. Delta held a driver recruitment meeting on September 24, 2002. Cherry and
Pate took part in the meeting. Also at the meeting were three of Appellant’s drivers, including
Hulsey. Hulsey testified that Pate contacted him directly to discuss employment opportunities at
Delta, asking about other drivers for Appellant, and encouraging him to come to the recruitment
meeting. Another recruitment meeting took place on October 7, 2002, which Etheridge and Pate
attended. Following the Delta recruitment meetings, all three of Appellant’s drivers who attended
the meetings signed on to work for Delta. Hazel informed Spevak that the drivers were on board
with Delta, and in October of 2002, Office Max transferred its business from Appellant to Delta.
Appellant alleges that Delta, Etheridge, and Zirock continued to contact and recruit Appellant’s
drivers.
Appellant further alleges that Delta and Cherry took steps to encourage another of
Appellant’s major customers, APL, to switch its business to Delta. A few days before he resigned
from Appellant, Cherry intentionally over booked capacity with APL so that APL’s freight could not
1
Hunt testified by affidavit as follows:
On Monday, August 5, 2002, Tim Cherry called me into his office. He told me he would not be in at
work the next day; that he was taking a sick day and going to Jackson, Tennessee to meet with Delta
Express. Tim Cherry told me he “had made job offers to Dennis (Etheridge), Charlie (Pate) and Greg
(Zirock)” and asked if I would be interested. I responded “No, I don’t think so.” Tim Cherry told me
he would “be taking Charlie (Pate) right away but that, because Delta Express was just getting started,
it might be later before Dennis (Etheridge) and Greg (Zirock) came over.”
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be moved. Appellant had to pay a storage cost for storing the freight. Also regarding APL,
Appellant alleges that it was outbid by Delta for certain transportation work, and that Cherry was
somehow responsible for this, as he had access to Appellant’s confidential business information.
Further, as soon as Cherry began work for Delta, he contacted Monique Gainer (“Gainer”) at APL
to alert her of his employment change, telling her to call him if there was anything he could do for
her. Also, Cherry and Delta executive John Green treated the two APL employees responsible for
awarding APL business to companies to a golf outing. One of these employees testified that the golf
outing had a customer relations purpose.2 In late 2002, APL transferred a large portion of its
business to Delta, costing Appellant its biggest account in Nashville.
Appellant alleges that due to Appellees’ actions, it has suffered significant damages. First,
it has lost business from large customers, including APL and Office Max. Second, Cherry,
Etheridge, Pate, and Zirock, four of its key employees, resigned without notice and at approximately
the same time. The resignations left Appellant’s Nashville office in utter chaos, and Appellant was
unable to properly service its customers. As a result, Appellant had to cancel large contracts with
another lucrative customer. Much time and money was spent to interview and train replacements
for the four employees so that Appellant would not have to close for business. Third, Appellant has
lost good will with many of its customers, including APL, Office Max, and Yang Ming.
As noted above, Appellees’ version of the facts differ significantly. Delta alleges that both
APL and Yang Ming, who were long time customers of Delta, spoke to Delta on several occasions,
dating back to 1999, about the possibility of Delta opening a Nashville location. Delta alleges that
in 2002, APL approached it about opening an office because it was dissatisfied with the service it
was receiving from Appellant. Delta further alleges that the Regional Supervisor with APL
suggested that Hazel should contact Cherry, Etheridge, Pate, and Zirock about possible employment.
Hazel testified that he contacted each of the four employees separately, and that none of the
prospective employees ever discussed the employment opportunities with each other.
Regarding the solicitation of owner-operator drivers, Appellees contend that Hazel contacted
those working for Appellant at the specific request of Spevak, and that Cherry, Etheridge, Pate, and
Zirock had no involvement. Appellees further contend that at the recruitment meetings, Cherry,
Etheridge, and Pate had only minor roles and merely assisted with the distribution, collection, and
2
Joseph M . Gilpatrick, an APL employee, testified as follows:
Q: And would it be fair to say that since you have no personal relationship with Mr. Cherry outside
of work, that the golf outing at The Hampton’s golf club was related to your job as director of
operations at APL?
A: That’s fair to say. Probably I wouldn’t have been invited had I not been the director of operations.
....
Q: W ould it be fair to say that the golf outing at The Hampton’s had a customer relations purpose?
A: Yes.
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copying of paperwork. Therefore, Appellees maintain that there was no active solicitation of
Appellant’s drivers on the part of Cherry, Etheridge, Pate, and Zirock. Appellees also contend that
Cherry, Etheridge, Pate, and Zirock had no access to Appellant’s confidential business information,
and that they were no more privy to such information than any person reading the company’s website
would be.
All of the Appellees testified that Delta required each of them to acknowledge that he would
be neither expected nor permitted to engage in any conduct on behalf of Delta that would violate any
enforceable provision of his Employment Agreement with Appellant. Appellees argue that Cherry,
Etheridge, Pate, and Zirock engaged in no conduct which violated their Employment Agreement with
Appellant.
Appellant filed a Verified Complaint for Temporary Injunction, Permanent Injunction, and
Damages against Appellee Cherry on September 5, 2002. On September 24, 2002, Appellant
amended its complaint, adding Appellee Delta as a defendant. Appellant amended its complaint a
second time on July 3, 2003, adding Appellees Etheridge, Pate, and Zirock as defendants. All
Appellees filed answers to Appellant’s complaint. In November of 2003, all five of the Appellees
filed Motions For Summary Judgment.
Regarding Appellee Delta, on January 30, 2004, the trial court granted Delta’s Motion for
Summary Judgment, stating the following in its Order:
This matter having come before the Court for hearing on the Motion for
Summary Judgment of Defendant, Delta Depot/Delta Express, LLC (“Delta”), on
January 9, 2004. The Court, having considered the Motion for Summary Judgment;
the undisputed material facts; the arguments of counsel both for and against the
Motion; and, the entire record in this cause, finds:
Delta took no steps to cause or procure the breach of any contracts which may
have existed between Intermodal Cartage Company (“IMC”) and its employees or
customers;
Delta did not interfere with any of IMC’s contractual relations nor did it
interfere with any of IMC’s business relationships or prospective business relations;
IMC has no legitimate business interest which would warrant protection by
the restrictive covenants placed in its employment agreements;
Neither Cherry, Pate, Etheridge or Zirock were privy to any confidential
information of IMC while employed at IMC;
Neither Cherry, Pate, Etheridge or Zirock, individually or in the aggregate,
enjoyed such a close relationship to any customers of IMC so as to constitute a
special relationship or be seen as the face of the company;
Cherry did not violate any enforceable provision of his employment contract
with IMC;
IMC did not incur any damages proximately caused by Pate, Etheridge or
Zirock in obtaining employment with Delta before the expiration of the thirty (30)
day period following their termination of employment from IMC;
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IMC has failed to establish that it sustained any damages as a result of its
alleged breach of the non-competition and non-solicitation provisions or the IMC
employment contract;
therefore, the Motion is well taken and should be granted.
IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that Delta
is entitled to judgment as a matter of law pursuant to Tenn. R. Civ. P. 56 as to all
claims made against it by IMC in its Second Amended Verified Complaint, and,
accordingly, Delta’s Motion for Summary Judgment is hereby granted consistent with
this Court’s ruling of January 9, 2004.
Regarding Appellees Cherry, Etheridge, Pate, and Zirock, on February 2, 2004, the trial court
issued four Orders granting their Motions For Summary Judgment. The Order issued in regard to
Cherry appears below.
This matter having come before the Court for hearing on the Motion for
Summary Judgment of Defendant, Timothy James Cherry, on January 9, 2004. The
Court, having considered the Motion for Summary Judgment; the undisputed
material facts; the arguments of counsel both for and against the Motion; and, the
entire record in this cause, finds:
Intermodal Cartage Company (“IMC”) has no legitimate business interest
which would warrant protection by the restrictive covenants placed in its employment
agreements;
That Cherry was not privy to any confidential information of IMC while
employed at IMC;
Cherry did not enjoy such a close relationship to any customers of IMC so as
to constitute a special relationship or to be seen as the face of the company;
The non-compete and non-solicitation provisions contained in the IMC
employment contract are unenforceable;
Cherry did not violate any enforceable provision of his employment contract
with IMC;
IMC has failed to establish that it sustained any damages as a result of its
alleged breach of the non-competition and non-solicitation provisions of the IMC
employment contract;
And, therefore, the Motion is well taken and should be granted.
IT IS, THEREFORE, ORDERED, ADJUDGED AND DECREED that
Cherry is entitled to judgment as a matter of law pursuant to Tenn. R. Civ. P. 56 as
to all claims made against him by IMC in its Second Amended Verified Complaint,
and, accordingly, Cherry’s Motion for Summary Judgment is hereby granted
consistent with this Court’s ruling of January 9, 2004.
The Orders regarding Etheridge, Pate, and Zirock are the same as that of Cherry, above, save one
provision. The provision that differs is as follows: in the Orders regarding Appellees Etheridge,
Pate, and Zirock, the phrase “Cherry did not violate any enforceable provision of his employment
contract with IMC;” is replaced with the phrase “IMC did not incur any damages proximately caused
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by [Appellee] in his obtaining employment with Delta before the expiration of the thirty (30) day
period following his termination of employment from IMC;”.
Appellant presents numerous issues on appeal: (1) whether the trial court erred in granting
summary judgment and dismissing Appellant’s claims against Appellees Cherry, Etheridge, Pate,
and Zirock for breach of the Non-Solicitation of Employees provision of their Employment
Agreements with Appellant; (2) whether the trial court erred in granting summary judgment and
dismissing Appellant’s claim against Appellee Cherry for breach of the duty of loyalty; (3) whether
the trial court erred in granting summary judgment and dismissing Appellant’s claims against
Appellees Cherry and Zirock for breach of the Non-Competition provisions of their Employee
Agreements with Appellant; (4) whether the trial court erred in granting summary judgment and
dismissing Appellant’s claim against Appellee Delta for unlawful inducement of breach of contract,
tortious interference with contractual relations, and tortious interference with business relations; and
(5) whether the trial court erred in finding on summary judgment that Appellant failed to establish
that it sustained any damages as a result of Appellees’ actions in violation of the individual
Employee Agreements and relevant law. Appellee Delta alleges that the appeal as to Delta is not
properly before the Court, as Appellant failed to timely file its Motion to Alter or Amend Judgment.
II. STANDARD OF REVIEW
According to Tennessee Rule of Civil Procedure 56, a party seeking summary judgment must
“show that there is no genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law.” Tenn. R. Civ. P. 56.04. The summary judgment standard,
established by the Tennessee Supreme Court, is as follows:
According to Rule 56.03, summary judgment is to be granted if the "pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law." . . . In determining
whether or not a genuine issue of material fact exists for purposes of summary
judgment, . . . the trial court must take the strongest legitimate view of the evidence
in favor of the nonmoving party, allow all reasonable inferences in favor of that
party, and discard all countervailing evidence. Then, if there is a dispute as to any
material fact or any doubt as to the conclusions to be drawn from that fact, the motion
must be denied. . . . At the summary judgment stage the judge's function is not
himself to weigh the evidence and determine the truth of the matter but to determine
whether there is a genuine issue for trial. . . . [T]he issues that lie at the heart of
evaluating a summary judgment motion are: (1) whether a factual dispute exists; (2)
whether the disputed fact is material to the outcome of the case; and (3) whether the
disputed fact creates a genuine issue for trial.
Byrd v. Hall, 847 S.W.2d 208, 210-214 (Tenn.1993) (citations omitted). “The standard of review
of a trial court’s grant of summary judgment is de novo with no presumption of correctness.”
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Godfrey v. Ruiz, 90 S.W.3d 692, 695 (Tenn.2000).
III. ANALYSIS
Appellant alleges that Appellee Cherry represented the face of Intermodal Cartage Company
to its customers. Cherry spent large amounts of time, as well as large amounts of Appellant’s
money, developing personal relationships with key individuals at APL and Office Max, and therefore
Appellant argues that it had a protectable business interest: specifically, preventing Cherry from
using the valuable relationships and good will he developed with customers for his own, or his new
employer’s, benefit. Appellees Delta and Cherry argue that Cherry was in no way the face of the
company, and that Appellant had no protectable business interest that would justify enforcement of
the Employment Agreement.
This Court explored the protectable business interest and “face of the company” principles
in the case of Vantage Tech., LLC v. Cross, 17 S.W.3d 637 (Tenn.Ct.App.1999). Vantage, the
employer, dealt in portable eye surgery machines, and hired and trained technicians to operate its
machines. Good will was very important to Vantage’s business, and the company encouraged its
employees to maintain relationships with physicians they assisted. The employees had entertainment
expense accounts to facilitate such relationships. Vantage also kept detailed records of physicians’
surgical preferences and personal information, utilized to more effectively assist the physicians
during procedures and encourage good will.
One of the technicians, Cross, terminated his employment with Vantage to work for a
physician that he had assisted while employed by Vantage. Vantage filed suit to enforce the
employment agreement that Cross had signed. A portion of this Court’s analysis is helpful to the
present issue at hand:
[A] threshold question is whether the employer has a legitimate business interest, i.e.,
one that is properly protectable by a non-competition covenant. Several principles
guide the determination of whether an employer has a business interest properly
protectable by a non-competition covenant. Because an employer may not restrain
ordinary competition, it must show the existence of special facts over and above
ordinary competition. These facts must be such that without the covenant, the
employee would gain an unfair advantage in future competition with the employer.
Considerations in determining whether an employee would have such an unfair
advantage include (1) whether the employer provided the employee with specialized
training; (2) whether the employee is given access to trade or business secrets or
other confidential information; and (3) whether the employer’s customers tend to
associate the employer’s business with the employee due to the employee’s repeated
contacts with the customers on behalf of the employer. These considerations may
operate individually or in tandem to give rise to a properly protectable business
interest.
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Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 644 (Tenn.Ct.App.1999) (citations omitted).
Specifically elaborating on the third consideration, an employee’s repeated contacts with customers
on behalf of an employer, this Court stated:
It is often the case that the customer associates the employer's business with the
employee due to the employee's repeated contacts with the customer. The employee
in essence becomes "the face" of the employer. This relationship is based on the
employer's goodwill. The employee's role in this relationship is merely that of the
employer's agent. In this role, the employee is made privy to certain information that
is personal, if not technically confidential. Because this relationship arises out of the
employer's goodwill, the employer has a legitimate interest in keeping the employee
from using this relationship, or the information that flows through it, for his own
benefit.
Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 645-646 (Tenn.Ct.App.1999).
In making its decision, this Court stated that
[T]he relationships between Vantage and the hospitals and surgeons were initiated
by Vantage and were built on the foundation of Vantage's goodwill. Any contribution
of Cross to the development and sustenance of these relationships was accomplished
in Cross' role as an agent of Vantage. In performance of this role, Cross was made
privy to surgeon preferences. He had a degree of knowledge of Vantage's other
customers and the prices it charged for Cross' services. Additionally, it was in this
role as Vantage technician that Cross' relationship with Dr. Gollamudi was initiated
and developed. This relationship, as well as the information that flowed through it,
gives Cross an unfair advantage in competition against his former employer because
it comes at the expense of his former employer.
Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 646 (Tenn.Ct.App.1999). In finding that Vantage had
a legitimate business interest properly protectable by a covenant not to compete, this Court stated
that, regarding the balance between enforcing and not enforcing non-compete provisions: “If the
covenant is not enforced, Vantage stands to lose its . . . investment in developing customer
relationships. . . . If the covenant is enforced, Cross merely loses that which does not belong to him.”
Vantage Tech., LLC v. Cross, 17 S.W.3d 637, 647 (Tenn.Ct.App.1999).
While the findings of the trial court as to all Appellees and all of Appellant’s claims might
be unimpeachable after a trial on the merits, it is likewise clear that what the trial court refers to as
“undisputed facts” are very much disputed facts based upon the credibility of witnesses, many of
whom have an interest in the outcome of the case. Summary judgment cannot be used as a vehicle
for determination of disputed facts or inferences to be drawn from disputed facts.
Shortly after the adoption of the Tennessee Rules of Civil Procedure, Justice Harbison
observed:
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In concluding this opinion we feel it proper to comment upon the procedure
which was followed in the trial of this case. Summary judgment proceedings in this
state were authorized for the first time by Rule 56 of the Tennessee Rules of Civil
Procedure. This new procedure was designed to fill a vacancy or void which had
existed in prior practice and to provide a procedural step which had heretofore not
existed. Under previous practice, in both the circuit and chancery courts, there had
been no satisfactory intermediate step between the demurrer, which dealt only with
the contents of pleadings, and a full-scale trial of a case upon the merits. The
summary judgment procedure was designed to provide a quick, inexpensive means
of concluding cases, in whole or in part, upon issues as to which there is no dispute
regarding the material facts. Where there does exist a dispute as to facts which are
deemed material by the trial court, however, or where there is uncertainty as to
whether there may be such a dispute, the duty of the trial court is clear. He is to
overrule any motion for summary judgment in such cases, because summary
judgment proceedings are not in any sense to be viewed as a substitute for a trial of
disputed factual issues. In the present case, the Chancellor concluded immediately
that there was a dispute by these parties as to whether there was or was not a total
destruction of the building, an issue which he deemed material. Instead of overruling
both parties’ motions for summary judgment, however, he ordered a reference upon
the disputed issue, and only after a lengthy reference had been completed, and
exceptions thereto had been overruled, did he then purport to sustain the motion for
summary judgment filed by the respondents. This is, to say the least, a very irregular
use of Rule 56 proceedings. Unless the Rule is utilized only where clearly applicable
and plainly within its designed purpose, its use may have the effect of preventing full
and clear development of issues which could be accomplished by normal trial
proceedings.
EVCO Corp. v. Ross, 528 S.W.2d 20, 24-25 (Tenn.1975).
The overruling of a summary judgment motion under the standard set forth in EVCO does
not mean that a question for the finder of fact is necessarily presented, nor that a motion for a
directed verdict in a trial on the merits may not be granted.
It has sometimes been stated in appellate opinions that if a motion for
summary judgment is overruled, a jury question is presented. This is not strictly
accurate. The overruling of a motion for summary judgment does not necessarily
mean that the case will go to a jury at a trial, because the evidence adduced at trial
may be significantly different from that contained in affidavits or depositions heard
pre-trial on summary judgment proceedings. All that the overruling of a motion for
summary judgment indicates is that the case should proceed further. See Williamson
County Broadcasting Co. v. Williamson County Bd. of Education, 549 S.W.2d 371
(Tenn.1977). Whether it will ever go to a jury or whether it will be disposed of on
directed verdict pursuant to Rule 50, T.R.C.P., depends upon the record developed
at trial.
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Hamrick v. Spring City Motor Co., 708 S.W.2d 383, 388 (Tenn.1986).
The case at bar is essentially a swearing contest among people very much interested in the
outcome of the case. Such testimony cannot form a predicate for granting either summary judgment
or a directed verdict since even if such testimony is uncontradicted and unimpeached, the interest
of the witness in the outcome of the case is sufficient to create an issue of fact. Poole v. First Nat’l
Bank of Smyrna, 29 Tenn.App. 327, 196 S.W.2d 563 (Tenn.Ct.App.1946); Morris v. Columbia
Constr. Co., Inc., 109 S.W.3d 314 (Tenn.Ct.App.2003); Anderson v. Mason, 141 S.W.3d 634
(Tenn.Ct.App.2003).
This Court has held:
Our courts have also equated motions for summary judgments pursuant to
Tenn.R.Civ.P. 56 with motions for directed verdicts. Bennett v. Mid-South
Terminals Corp., 660 S.W.2d 799, 800 (Tenn.App.1983). Under state law, a directed
verdict should not be granted if there is any doubt about the conclusions to be drawn
from the evidence. Sauls v. Evans, 635 S.W.2d 377, 379 (Tenn.1982) and Redding
v. Conally Ford, Inc., 662 S.W.2d 938, 942 (Tenn.App.1983). Uncontradicted
evidence will not entitle a party to a directed verdict, and by analogy to a summary
judgment, when the credibility of the evidence has been called into question using
one of the legal modes available to test the credibility of witnesses. Curtis v. Kelsey
Wheel Co., 168 Tenn. 262, 264, 77 S.W.2d 449, 449-50 (1935); Standard Oil Co. of
Louisiana v. Roach, 19 Tenn.App. 661, 674, 94 S.W.2d 63, 71 (1936); and Sprankle
v. Meyernick, 4 Tenn.Civ.App. 515, 520 (1913).
Knapp v. Holiday Inns, Inc., 682 S.W.2d 936, 942-43 (Tenn.Ct.App.1984).
Several of the customers at issue testified as to their relationships with Appellant’s
employees. Spevak, Director of International Logistics at Office Max, testified as to the effect of
Cherry’s and Pate’s resignations, stating that “...they had vanished from Intermodal Cartage, that on
a Friday they worked there, and on a Monday they did not, and...that was extremely distressing to
us.” Monique Gainer of APL testified that she and Cherry had developed a close friendship:
Q: Would it be fair to say that you and Mr. Cherry are social friends outside of
work?
A: Yes.
Q: And so would it be fair to say that relationship developed while he was an
employee at Intermodal Cartage?
A: Yes.
Mark George, president and CEO of Appellant, testified as follows regarding the
relationships that Appellant’s former employees maintained with customers, and the effect of those
relationships on Appellant’s business:
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Q: When you refer to valuable good will and patronage, does that mean that you
have little or no customer complaints? How do you determine that you’ve got good
will, valuable customer good will and patronage? How do you measure that?
A: By customer loyalty, the relationship between employee and client.
Q: Can you describe that customer loyalty between customer and client?
A: Well, the customer learns to have confidence and trust in the employees they’re
doing business with at your company and it becomes – they become somewhat like
family to them where they feel like them giving your employee cargo and that
employee servicing their business well has value to that employee, and has value to
the company that they’re doing business with. And its just a – it just fosters good
will and continued patronage from our customers. They get a sense of loyalty to you.
Q: To the individual?
A: And the company they’re doing business with
Q: Do you contend that Tim Cherry had established that type of loyalty with the
customers he worked with?
....
A: . . . Yes, he had earned valuable good will with APL, with Office Max, with
Yang Ming Lines.
....
Q: Is there anyone else at Intermodal Cartage that has established this customer
loyalty or good will with APL, Office Max and Yang Ming Lines?
A: Yes.
Q: Who are those individuals?
A: Charlie Pate, Greg Zirock.
Significantly, Cherry’s job responsibilities with Delta are very similar to the responsibilities
he had while working for Appellant. While Cherry does not include sales in his own description of
his responsibilities, his superior, Hazel, testified as follows:
Q: What are Mr. Cherry’s responsibilities as vice president of the Nashville area?
A: Day-to-day management of the personnel there. To explore bringing new
business in to Delta.
....
Q: Within the Delta organization who has responsibility for soliciting new
customers or soliciting more business from existing customers?
A: Myself; John Green; Tim Cherry, for new customers; Barb Brunswick in
Atlanta.
The testimony makes it obvious that Cherry maintained fairly extensive relationships with
customers. These relationships were maintained for the benefit and at the expense of Appellant.
Therefore, the relationships between Cherry and Appellant’s customers do not belong to Cherry; he
was merely the device used by Appellant to establish good will with its customers.
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One of the primary issues asserted by Appellant is that while he was still an employee of
Intermodal Cartage, Cherry met with Hazel and thereafter, before resigning, he offered jobs at Delta
to Etheridge, Pate and Zirock, also then employed at Appellant. Hazel met with Cherry for lunch
in mid-July 2002, and, in his deposition, Hazel testified:
Q: . . . Tell me about the discussion you had with Mr. Cherry at that
meeting.
A: We talked about whether or not he was interested. I let him know that
it was likely that we would be doing a substantial amount of A.P.L. business. We
generally talked about if he would be interested or not in looking further at coming
on with Delta.
He did mention at that meeting that he did have an employement contract also
and he was interested in looking further.
Q: And how did that meeting end?
A: With my asking him for a copy of that employment agreement and that we
would talk further as time went on.
Q: When and how did you receive a copy of Mr. Cherry’s employment agreement?
A: I believe he faxed it to me the next day. He may have mailed it but I’m pretty
sure he faxed it to me.
Q: Do you know approximately when or what part of the month of July you had this
meeting with Mr. cherry at the Picadilly?
A: Mid July.
....
Q: What was the next thing that happened leading to Mr. Cherry’s employment
with Delta; the thing that happened after he faxed or mailed you a copy of his
employment agreement?
A: I spoke with Mr. Derrick concerning the employment agreement, I gave him a
copy of it and asked him about employment agreements, the validity of what it was --
of what that employment agreement was.
Q: And following your discussion with Mr. Derrick what action did you take
concerning Mr. Cherry’s possible employment with Delta?
A: I had several conversations with Tim over the phone, just trying to move closer
to figuring out a way of hiring Tim.
Q: What were the major issues that stood between you and Mr. Cherry coming to
work for Delta? What did you all have to talk about? Was it money? Was it a
relocation package? Was it bonus, or what?
A: I think it was more of Tim being willing to leave Intermodal Cartage. It wasn’t
money because we really didn’t discuss that for some time. I knew about what he
was making, he told me that. It was more him making up his mind.
Q: So you recall that Mr. Cherry had some reservations about whether or not he
should leave Intermodal; is that correct?
A: Yes.
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Q: And so what did you say with respect to Cherry to encourage him to join Delta?
Did you paint a brighter future or -- what did you do to kind of use a little
salesmanship to help him make up his mind?
A: I really didn’t. I just answered any questions he might have about Delta and, you
know, it was more his discomfort or unhappiness with his work environment that he
was in than my salesmanship.
Hazel denied that he talked to Cherry about hiring Etheridge, Pate and Zirock for Delta.
Selena Hunt testified by deposition that she started with Intermodal Cartage in the year 2000
and later, in Nashville, as a customer service specialist. She testified regarding the hiring by Delta
of Cherry, Etheridge, Pate and Zirock during the period of August 5, 2002, when Cherry told her he
was meeting the following day with representatives of Delta, and August 8, 2002, which was
Cherry’s last day with Appellant.
Q: And that was the only time he ever called you at Intermodal after he left? Your
next statement down there, I’m trying to figure out: “he has only tried calling me one
time after his departure with Intermodal.”
A: That was the only time.
Q: So what that’s saying is that’s the only time you’ve talked to Tim since he left?
A: Yes.
Q: No, the next little paragraph, it says, “Prior to Tim’s departure there were many
meetings in Tim’s office with Greg, Charlie, and Dennis.”
Are those the closed-door meetings you were telling me about a moment ago --
A: Yes.
Q: Where did you -- you didn’t know what was discussed, you just knew they were
in there?
A: Right.
Q: Now, the bottom paragraph, Randy told you to write that, didn’t he?
A: No.
Q: Tell me what you know about that.
A: Tim had proposed jobs to Dennis, Greg, and Charlie. They wouldn’t have
known about the job if it hadn’t been for Tim.
Q: You made that assumption?
A: Right.
Q: Nobody --
A: That they would have -- right, yes.
Q: I just want to find out where you got that knowledge.
Nobody told you that Tim had offered them jobs?
A: Yes.
Q: Who told you that?
A: Tim.
Q: When?
A: I don’t know -- prior, before him leaving, the first week in August.
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Q: I’m a little confused. Tim had offered them jobs at Delta? I’m a little confused
how he could do that when he was working for Intermodal.
....
A: I know he offered them a job.
Q: Okay. And now I want to ask you know you know that?
A: He told me.
Q: When did he tell you?
A: August, I don’t know a date.
Q: Was it after Tim left?
A: No, it was before.
Q: Where were you when he told you this?
A: In his office.
Q: Tell me the context of the conversation. I’m still confused about it.
A: Tim and I were kind of close at work. We talked about a lot of things and he
would tell me how he felt and stuff. And he said that he was going to offer Dennis,
Charlie, and Greg a position at Delta. And that he even said that if he took the job
that Charlie would go first and that Dennis and Greg would come shortly after, that
he didn’t know that they were going to take the job, he didn’t know if they were
going to go, but he was going to propose it to them.
Q: So he had not proposed it to them when he told you?
A: Well, yes. Yes, because this was when all the closed-door meetings were taking
place.
Q: But did he tell you in those closed-door meetings, “I proposed jobs to them”?
Or is that something that you’re now kind of speculating or filling in the gaps?
A: No, he told me that he had offered them jobs.
Q: He had offered them jobs?
A: Yes.
Q: And what did you say in response to that?
A: What could I say?
All of these witnesses have an interest in the outcome of the case. Cherry has a direct
interest, while Hazel and Hunt have a derivative interest in the fact that they are employees of
corporate parties to the litigation. See Knapp, 682 S.W.2d at 943.
In its Response to the Statement of Undisputed Material Facts filed by Appellant, Appellee
Delta says:
4. As Regional Vice-President for Intermodal, Tim Cherry had
responsibility for sales, operations and administration. (Dep. of T. Cherry, pg. 29;
(Dep. of R. Wrigth [sic], pg 53) In this capacity, Mr. Cherry had frequent
involvement with some [of] Intermodal’s most valued customers and would visit
certain out of town customers on at least a yearly basis.
RESPONSE: Undisputed for purposes of Motion for Summary Judgment.
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5. Starting July 2002 and up until Tim Cherry left IMC August 8, 2002,
Cherry held “closed door” meetings with only Pate, Etheridge and Zirock in
attendance. These “Closed door” meetings between Cherry, Etheridge, Pate and
Zirock occurred two or three times a week. (Affidavit of S. Hunt) In at least one of
the “closed door” meetings between Cherry, Ehteridge, Page [sic] and Zirock, Cherry
told the others that he wasn’t happy (working at Intermodal) and was thinking about
leaving the company. (Dep. of G. Zirock, pag 33)
RESPONSE: Undisputed for purposes of Motion for Summary Judgment.
6. On August 5, 2002, Tim Cherry called Selena Hunt into his office.
(Affidavit of Selena Hunt, pg 1; Deposition of Selena Hunt pgs. 80-83, 88, 91, 135;
Dep. of T. Cherry pg 74) Cherry told Ms. Hunt he had made job offers to Dennis
(Etheridge), Charlie (Pate) and Greg (Zirock), for them to go to work for Delta.
(Affidavit of Selena Hunt, pg 1; Deposition of Selena Hunt pgs. 80-83, 88, 91, 135;
Dep. of R. Wright, pgs. 123-125)
RESPONSE: Disputed. Hunt knew that Cherry did not work for Delta and
that the comments were sarcastic and joking. (Dep. of Hunt, p. 76-77).
7. On August 5, 2002, Tim Cherry told Selena Hunt that he “would be
taking Charlie (Pate) right away but that, because Delta Express was just getting
started, it might be later before Dennis (Etheridge) and Greg (Zirock) came over.”
(Affidavit of S. Hunt, pg. 1; Dep. of S. Hunt, pgs. 136-137)
RESPONSE: Disputed. Hunt knew that Cherry did not work for Delta and
that the comments were sarcastic and joking. (Dep. of Hunt, p. 76-77).
So we have it undisputed that “closed-door meetings” occurred between Cherry, Pate,
Etheridge and Zirock from July 22, 2002, up until the departure of Cherry from Intermodal on
August 8, 2002. Then, as to the alleged job offers to Etheridge, Pate and Zirock made by Cherry to
which Hunt testifies, we have meaningless responses. Obviously, Cherry did not work for Delta at
that time, and nobody has said otherwise. The factual point always has been that Cherry made such
offers of employment to Etheridge, Pate and Zirock while still employed with Intermodal but
subsequent to his discussions with Hazel relative to future employment by Delta.
Disputed issues of fact permeate this case, and summary judgment is improper.
IV. CONCLUSION
The record in this case presents issues to be determined by a trier of fact, not the trier of law.
The third element of unfair advantage established by this Court in Vantage, standing alone, is enough
to avoid summary judgment when applied to the facts in this record. Regarding the four Appellee
employees, there are issues of fact about whether they solicited truck drivers, whether Cherry
solicited the other three for Delta, and whether they solicited Appellant’s customers. There are
issues of fact regarding whether Cherry breached his duty of loyalty to Appellant. There are issues
of fact regarding whether Delta induced Appellant’s four employees to breach their Employment
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Agreements, or interfered with Appellant’s relationships with its employees. The breach of duty of
loyalty claim against Cherry survives summary judgment. The judgment of the trial court is reversed
and the case remanded for further proceedings. Costs of appeal are assessed to Appellees.
___________________________________
WILLIAM B. CAIN, JUDGE
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