UWork.Com, Inc. v. Paragon Technologies, Inc.

BARNES, Presiding Judge,

concurring in part and dissenting in part.

Paragon presented sufficient evidence to withstand summary-judgment on its claims for breach of fiduciary duty brought against Covendis and its CEO, Raymond Tsao. Because the majority concludes otherwise, I respectfully dissent to Division 4 of the majority opinion in Case No. A12A2448. 11

Paragon’s Breach of Fiduciary Duty Claim against Covendis. In denying summary judgment to Covendis on Paragon’s breach of fiduciary duty claim, the trial court concluded that there was some evidence that Covendis had acted as Paragon’s agent for the limited purpose of submitting new work proposals on its behalf using the Vendor Management System (‘VMS”), and that Covendis breached its fiduciary duty owed to Paragon by submitting proposals reflecting new billing rates different from the ones proposed by Paragon on April 28,2010. Reversing the trial court, the majority finds that there was no evidence of a special agency relationship, and thus no evidence of a fiduciary relationship between Covendis and Paragon. I respectfully disagree with the majority.

An agency relationship “arises wherever one person, expressly or by implication, authorizes another to act for him or subsequently ratifies the acts of another in his behalf.” OCGA § 10-6-1. “A special agent is one to whom there is a delegation to do a single act.” (Citation and punctuation omitted.) Lewis v. Citizens & Southern Nat. Bank, 139 Ga. App. 855, 858 (1) (b) ( 229 SE2d 765 ) (1976). See Foster v. Jones, 78 Ga. 150, 156 ( 1 SE 275 ) (1887). And “[w]here an agency relationship exists, the agent has a fiduciary duty to his principal.” Wright v. Apartment Investment & Mgmt. Co., 315 Ga. App. 587, 592 (2) (a) ( 726 SE2d 779 ) (2012). Whether an agency relationship exists, and thus whether a fiduciary duty may be found, “is generally a factual matter for the jury to resolve.” (Citation and punctuation omitted.) Id.

In the present case, there was evidence that on April 22, 2010, Covendis e-mailed Paragon, requesting that it submit revised billing rates per their March 1, 2010 Agreement. Although the Supplier Agreement contemplated that Paragon would enter work proposals with rate information into the VMS, Covendis deviated from the Supplier Agreement and indicated in its April 22 e-mail that it would “adjust the rates in the system” upon receiving the revised rates from Paragon. Paragon responded on April 26, thanking Covendis and *603 stating that it would supply the new rates to Covendis on April 28. Subsequently, on April 28, Covendis entered the VMS and submitted several new work proposals “on behalf of Paragon by Covendis.” In entering the work proposals, Covendis also made certain representations and verifications to the State on Paragon’s behalf.

A jury could infer from this evidence the existence of a special agency relationship. The e-mail exchange between Covendis and Paragon, when construed in the light most favorable to Paragon, would support a finding that Covendis offered to enter the VMS and submit new work proposals for Paragon containing the revised billing rates that would be proposed by Paragon, and that Paragon agreed to this arrangement and authorized Covendis to act on its behalf for this limited purpose. Moreover, the fact that Covendis expressly stated that it was acting “on behalf of Paragon” and made representations and certifications on Paragon’s behalf when it subsequently entered work proposals into the VMS would buttress a finding by the jury of a special agency relationship. In light of the evidence of such a relationship, there was at least some evidence that Covendis owed a fiduciary duty to Paragon in submitting the new work proposals onto the VMS on April 28.

The majority, in contrast, finds that a special agency relationship should not be inferred from the e-mail exchange between the parties coupled with the other evidence in the case. But it is well settled that on summary judgment, “all reasonable conclusions and inferences drawn from the evidence are construed in the light most favorable to the nonmovant.” Spectera, Inc. v. Wilson, 317 Ga. App. 64, 66 ( 730 SE2d 699 ) (2012). In addressing motions for summary judgment,

we must remain mindful of the jury’s role in the process to resolve any and all conflicts in the evidence. It is the jury, not the court, which is the factfinding body. It weighs the contradictory evidence and inferences, judges the credibility of witnesses, . . . and draws the ultimate conclusion as to the facts. The very essence of its function is to select from among conflicting inferences and conclusions that which it considers most reasonable. . . . From this perspective, it is preferable not to have [trial or appellate courts] stand in the shoes of the several men and women of various backgrounds who make up a jury and determine what inferences they may draw from the evidence.

(Citations and punctuation omitted.) Service Merchandise v. Jackson, 221 Ga. App. 897, 898 (1) ( 473 SE2d 209 ) (1996). It may well be true that a jury, taking into account the e-mail exchange and other *604 evidence in this case, may select among the competing inferences and ultimately find that a special agency relationship was never created. 12 But that is an issue for trial, not for summary judgment.

In addition to the evidence of a special agency relationship and thus of a fiduciary duty owed by Covendis to Paragon, there was evidence that Covendis breached that duty. “An agent is . .. under a duty to obey his principal’s instruction” and is bound by restrictions that his principal has placed on the agency. Stanford v. Otto Niederer & Sons, Inc., 178 Ga. App. 56, 57 (1) ( 341 SE2d 892 ) (1986). Here, there was evidence that on April 28, Covendis entered into the VMS work proposals on Paragon’s behalf that contained revised rates that it deemed appropriate, rather than the rates submitted to it by Paragon on that date. Moreover, when Paragon instructed Covendis to enter the VMS on that same date and change the rates on the work proposals to reflect the ones that had been submitted by Paragon, Covendis refused. 13 Under these circumstances, ajury couldfindthat Covendis breached its fiduciary duty owed to Paragon. Consequently, I would affirm the trial court’s denial of summary judgment to Covendis on Paragon’s claim for breach of fiduciary duty. See, e.g., Nat. Council on Compensation Ins. v. Strickland, 241 Ga. App. 504, 506-507 (1) ( 526 SE2d 924 ) (1999) (genuine issue of material fact existed over whether defendant was acting in fiduciary capacity and breached its duties owed to plaintiff, where there was evidence that plaintiff submitted insurance application to defendant so that coverage could be assigned to an insurer, and defendant changed the application without plaintiff’s knowledge or consent).

Paragon’s Breach of Fiduciary Duty Claim against Tsao. Paragon also asserted a breach of fiduciary duty claim against Tsao, Covendis’s CEO, in his individual capacity. The trial court denied his motion for summary judgment on this claim, and, unlike the majority, I would affirm.

The general rule is that “[a] corporation possesses a legal existence separate and apart from that of its officers ... so that the *605 operation of a corporate business does not render officers ... personally liable for corporate acts.” Clay v. Oxendine, 285 Ga. App. 50, 57 (3) ( 645 SE2d 553 ) (2007). But “a corporate officer who takes part in the commission of a tort committed by the corporation is personally liable [for the tort].” Almond v. McCranie, 283 Ga. App. 887, 889 (2) ( 643 SE2d 535 ) (2007). Furthermore, even if the corporate officer did not commit the tort himself, if “he specifically directed the particular act to be done,” he can be held personally liable. (Citation and punctuation omitted.) Jennings v. Smith, 226 Ga. App. 765, 766 (1) ( 487 SE2d 362 ) (1997). Here, there was evidence that Tsao personally directed other Covendis employees to enter the VMS on April 28 and submit the Paragon work proposals reflecting new billing rates that Covendis deemed appropriate rather than the rates submitted by Paragon. Moreover, Tsao sent the e-mail to Paragon specifically refusing to adjust the new rates in the VMS to reflect the ones proposed by Paragon. Given this evidence, the trial court did not err in denying summary judgment to Tsao on Paragon’s claim for breach of fiduciary duty. See Almond, 283 Ga. App. at 889 (2); Jennings, 226 Ga. App. at 766 (1). Therefore, I would affirm the trial court and let the matter proceed to a jury for resolution.

I am authorized to state that Judge McFadden joins in this opinion.

On Motion for Reconsideration.

In its motion for reconsideration, Paragon challenges our holding that the trial court erred in denying Covendis’ and Tsao’s motion for summary judgment on Paragon’s claim of breach of fiduciary duty. We find no merit to Paragon’s arguments regarding the existence of a special agency, either actual or apparent, but write on motion for reconsideration to address Paragon’s reliance upon the case of Nat. Council on Compensation Ins. v. Strickland, 241 Ga. App. 504 ( 526 SE2d 924 ) (1999), a case cited by the dissent but not previously cited by Paragon, to assert that questions of fact exist regarding Paragon’s claim that Covendis acted with apparent authority in entering the work proposals into the VMS on April 28, 2010.

Paragon argues that under the facts of this case, “because it would appear to the State that Paragon agreed to [the proposals entered by Covendis], Covendis had apparent authority [vis-a-vis] the State to enter proposals on Paragon’s behalf.” But as previously stated, no issue of apparent authority arises because Covendis both entered the proposals and accepted them on behalf of the State. Covendis took this action without authority from Paragon, and the State, as principal, is charged with knowledge of all the facts known *606 to its agent Covendis, including its lack of authorization, at the time it undertook this action. See OCGA § 10-6-58 (“Notice to the agent of any matter connected with his agency shall be notice to the principal.”). See also Gustafson v. Cotton States Mut. Ins. Co., 230 Ga. App. 310, 312 ( 496 SE2d 346 ) (1998). Although an exception to this statutory principle arises “[w]here an agent shall conspire with the other party’ against the principal, OCGA § 10-6-59, that exception does not apply here because the lower rates Covendis calculated and entered benefitted the State and there is no evidence that Covendis and Paragon conspired against the State.

Nothing in the factually distinguishable Strickland decision dictates a different result. In that case, Strickland sought to obtain workers’ compensation insurance covering his employees and himself through the Matrix Insurance Agency. After Matrix was unable to obtain such coverage independently, it applied on Strickland’s behalf to obtain the coverage from the Georgia Workers’ Compensation Assigned Risk Insurance Plan (the “Assigned Risk Pool”). Under a contract with the Georgia Insurance Commissioner, the National Council on Compensation Insurance, Inc. (“NCCI”) served as the administrator for the Assigned Risk Pool. A NCCI account analyst determined that Strickland’s application contained insufficient payroll for his inclusion within the workers’ compensation coverage. When the analyst called Matrix to resolve the problem, she testified that she received instructions from an unidentified person to exclude Strickland from coverage. Without contacting Strickland for confirmation, the NCCI analyst physically altered the application to indicate that Strickland wished to be excluded from coverage and assigned the application to an insurer who wrote the policy. When Strickland was subsequently injured and was denied coverage, he brought suit against NCCI and Matrix. Strickland, 241 Ga. App. at 504-505 .

This Court found that issues of fact remained as to the role NCCI occupied when it changed Strickland’s application and whether NCCI was acting in reliance upon instructions from Matrix. Strickland, 241 Ga. App. at 506 (1). If the jury found that NCCI was acting as an agent or subagent in changing the application, “NCCI acted in a fiduciary capacity for [Strickland], as his special agent for such limited purpose, with the assigned insurer . . . (Citation omitted; emphasis supplied.) Id. at 506-507 (1). In that instance, then NCCI would have acted “with apparent authority in presenting the altered application for assignment with [the insurer] . . . Id. at 507 (1).

In contrast, Paragon did not authorize Covendis to submit the work proposals; rather, Covendis simply informed Paragon that it would enter the rates and then undertook on its own initiative to *607 submit proposals with Covendis-calculated rates. Only after Coven-dis had entered these proposals did Paragon provide its own calculations and expressly authorize Covendis to enter work proposals at Paragon’s rates. Covendis refused to do so. Thus, no issue of actual or voluntary agency arises. Additionally, in Strickland the NCCI submitted Strickland’s application to a third party, which relied upon NCCI’s apparent authority in issuing workers’ compensation coverage. Here, Covendis did not present anything to a third party for its consideration; rather, it accepted on behalf of the State the very proposals that it had entered. Thus, as noted above, no issue of apparent authority arises. Accordingly, Strickland does not support Paragon’s claim for breach of fiduciary duty.

Decided March 29, 2013

Reconsideration denied April 12, 2013

jRobbins, Ross, Alloy, Belinfante & Littlefield, Richard L. Robbins, Jason Alloy, Heather H. Sharp, for appellants.

Nations, Toman & McKnight, Michael T. Nations, GaryJ. Toman, for appellee.

Motion for reconsideration denied.

I concur fully in Divisions 1, 2, and 3 in Case No. A12A2448, and I concur fully in Case No. A12A2449.

For example, the majority asserts that Paragon’s April 26 e-mail should not be construed as thanking Covendis for offering to enter the revised rates into the VMS on Paragon’s behalf because Paragon routinely ended its e-mails to Covendis with the phrase “thank you.” But Paragon’s April 26 e-mail can be construed in more than one way. One way to construe Paragon’s April 26 e-mail — in which Paragon responded to Covendis’s April 22 e-mail by saying “thank you” and agreeing to provide by April 28 the revised rates requested by Covendis so that it could “adjust the rates in the system” — is that Paragon was authorizing Covendis to enter revised rates into the VMS on Paragon’s behalf. Because Paragon’s April 26 e-mail is capable of competing constructions, the question of how to construe it should be left to a jury.

The e-mails reflecting this exchange between Paragon and Covendis are not included in the majority’s “Appendix A.”