Campbell v. CGM, LLC

          ORDER

          Joseph DiClerico, Jr. United States District Judge.

         Christopher Campbell, brings this action against his former employer, CGM, LLC, asserting claims for breach of contract; fraud, deceit and misrepresentation; violation of the New Hampshire Consumer Protection Act, RSA Chapter 358-A; and unpaid wages under RSA chapter 275. CGM brought counterclaims against Campbell for breach of contract; conversion; violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030; tortious interference with contract; punitive damages; and injunctive relief. Both Campbell and CGM have filed motions for summary judgment.

         Standard of Review

         Summary judgment is appropriate when the moving party “shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “A genuine dispute is one that a reasonable fact-finder could resolve in favor of either party and a material fact is one that could affect the outcome of the case.” Flood v. Bank of Am. Corp., 780 F.3d 1, 7 (1st Cir. 2015). Reasonable inferences are taken in the light most favorable to the nonmoving party, but unsupported speculation and evidence that “is less than significantly probative” are not sufficient to avoid summary judgment. Planadeball v. Wyndham Vacation Resorts, Inc., 793 F.3d 169, 174 (1st Cir. 2015) (internal quotation marks omitted).

         When considering cross motions for summary judgment, the court must “determine whether either of the parties deserves judgment as a matter of law on facts that are not disputed.” Barnes v. Fleet Nat'l Bank, N.A., 370 F.3d 164, 170 (1st Cir. 2004) (internal quotation marks omitted). To do that, the court views each motion separately, taking the facts in the light most favorable to the nonmoving party and drawing inferences in the nonmoving party's favor. OneBeacon Am. Ins. Co. v. Commercial Union Assurance Co. of Canada, 684 F.3d 237, 241 (1st Cir. 2012).

         Evidentiary Issues

         Campbell previously moved to strike the declaration of Duane Szarek submitted by CGM in support of its objection to Campbell's motion for summary judgment. Campbell asserted that the declaration impermissibly provided expert opinions when Szarek had not been disclosed as an expert witness. The court granted the motion to strike, and Szarek's declaration is not considered for purposes of the motions for summary judgment.

         CGM challenges statements made by Campbell in his affidavits as presenting “sham” affidavits. Specifically, CGM states that Campbell's statements in his affidavit dated June 1, 2015, that his company, Intellinet, had billings of “approximately $250, 000” and that the subject line on the check to Campbell from CGM for $5, 000 “indicated that this was the bonus [he] had earned on annual earnings from 2001 - 2004” are contradicted by deposition testimony given almost a year later on April 25, 2016. CGM also asserts that most of Campbell's October 24, 2016, affidavit is a sham because Campbell “attempts to contradict his clear deposition answers to unambiguous questions without explanation.”

         In the First Circuit, “‘[w]hen an interested witness has given clear answers to unambiguous questions, he cannot create a conflict and resist summary judgment with an affidavit that is clearly contradictory' without providing ‘a clear satisfactory explanation of why the testimony is changed.'” Colburn v. Parker Hanninfin/Nichols Portland Div., 429 F.3d 325, 332 (1st Cir. 2005) (quoting Colantuoni v. Alfred Calcagni & Sons, Inc., 44 F.3d 1, 4-5 (1st Cir. 1994)). That is, “a party opposing summary judgment may not manufacture a dispute of fact by contradicting his earlier sworn testimony without a satisfactory explanation of why the testimony has changed.” Abreu-Guzman v. Ford, 241 F.3d 69, 74 (1st Cir. 2001). “A subsequent affidavit that merely explains, or amplifies upon, opaque testimony given in a previous deposition is entitled to consideration in opposition to a motion for summary judgment.” Gillen v. Fallon Ambulance Serv., Inc., 283 F.3d 11, 26 (1st Cir. 2002)

         The sham affidavit rule does not apply to the challenged statements from the June 1, 2015, affidavit. The affidavit was prepared before Campbell was deposed, not after. The affidavit was prepared in support of Campbell's objection to CGM's motion to dismiss and was filed as additional support for Campbell's later motion for summary judgment. Therefore, the affidavit was not prepared to manufacture a factual dispute for purposes of opposing summary judgment.

         In addition, the challenged statements do not clearly contradict Campbell's deposition testimony. The affidavit says Intellinet had “billings of approximately $250, 000” and Campbell's deposition testimony was that he did not know the most Intellinet had ever grossed in a year. Further, Campbell provided an adequate explanation of the differences in his Reply Affidavit, dated October 24, 2016. The statement about the bonus check is merely Campbell's interpretation of the subject line on the check.

         The Reply Affidavit, dated October 24, 2016, provides an explanation of Campbell's statements about Intellinet's revenue and addresses statements made by CGM's founders in their declarations and deposition testimony. Because CGM asserts only that “most” of Campbell's affidavit is a sham, without explaining what statements clearly contradict Campbell's deposition testimony, CGM has not provided a sufficient explanation of the sham affidavit charge to permit review.

         Therefore, none of the statements in Chris Campbell's affidavits are precluded as shams.

         Background

         The background information is summarized from the parties' factual statements, with disputed facts noted as necessary.^[1]

         This case involves claims between Christopher “Chris” Campbell, the plaintiff, and CGM, LLC, which was founded and is operated by Chris's twin brother, Charles “Chuck” Campbell, and Chuck's business partner, Kevin Murphy. Hereafter, to avoid confusion between the Campbells, the individuals will be referred to by their first names as Chris, Chuck, and Kevin.

         Chris is an electrical engineer who founded Intellinet, Inc., a telecommunications business, that operated in Massachusetts and New Hampshire. CGM was founded by Chuck, Kevin, and a third partner who is no longer with the company, and operates in Georgia. CGM originally provided consulting services to telecommunications companies and now provides data processing and software development compliance services to telephone companies. Kevin is responsible for CGM's administrative and financial functions, and Chuck is responsible for business development.

         Intellinet did contract work for CGM in 2000. In early 2001, Chuck proposed that Chris become an employee of CGM. Chris was interested in Chuck's proposal. At the same time, another company, CCG Consulting, was considering acquiring CGM.

         On March 27, 2001, Chuck sent Chris an email with the subject of “New Christo Proposal.” In the email, Chuck said that the previous deal they had discussed was an “$180K annual package plus 10% of EBITDA.”^[2] The new proposal was “$160K annual package plus 6% of EBITDA plus 10% of CCG stock.” Chuck noted that he was concerned about Chris's monthly cash flow and the EBITDA payout in the first year. He explained the differences between the proposal if CGM were acquired by CCG and if it were not acquired.^[3] In closing Chuck wrote: “If the deal with CCG doesn't go through, we'll move right back to the previous deal. Please give me a buzz after you've looked it over and let's get something inked.”

         Chuck attached a spreadsheet to the email that is titled “Christo CGM deal” and is dated “3/26/2001.” The spreadsheet provided projections for four years of annual salary and “EO” for each year. The projections were for “Previously Discussed Christo Deal” and “Proposed Christo Deal w/ CGM Acquisition.” Chuck stated: “Previous proposal was to give you 10% of the companies [sic] bottom line earnings, going forward, plus $180K package (salary plus bennies). We figured cost of bennies were [sic] approximately 1K/mo and your monthly pretax check would be $14K.” Chuck also provided a projected stock value and explanation of the calculations. Chuck wrote: “We think we are a better company with you on board and want to craft a deal that works for all of us.”

         In the course of the negotiations, Chris was given an employment agreement. CGM represents that the employment agreement originated with CCG Consulting and was then modified by CGM and its attorneys. CGM also states that the employment agreement was required by CCG as part of the proposed acquisition that was being considered at that time. Chuck testified during his deposition that there were different versions of the employment agreement. The acquisition by CCG did not go through.

         Chris signed the employment agreement, which is dated May 24, 2001, but has an effective date of April 23, 2001.^[4] He testified that he gave the signed original of the agreement to Chuck. No one signed the agreement on behalf of CGM. Chris began to work at CGM on June 1, 2001.

         The copy of the employment agreement that Chris produced is seven pages long and jumps from Section 8 to Section 13, which is the last section. The agreement states that it is effective as of April 23, 2001, and is between Chris and CGM, LLC. The agreement provides that Chris will be paid an annual salary of $170, 000 in monthly installments as the base salary. In addition, Chris will “receive 10% of the annual earnings of Company (prorated in year one), to be calculated on a calendar year basis, and to be paid upon formal closure of the Company's [CGM's] annual books.”

         The agreement further provided that if the acquisition by CCG went through, Chris's annual salary would be reduced to $150, 000 and the bonus would be transferred “to an identical percentage of Company's stock in the acquiring entity.” It also provided for a closing bonus after the acquisition. CGM agreed to pay the cost of Chris's existing medical benefits plan. The agreement included provisions for termination, nondisclosure of trade secrets and confidential information, non-solicitation and non-recruitment covenants, CGM's right to materials and the return of materials, and compliance with policies and laws. The last section, titled “Miscellaneous”, includes clauses for severability, waiver, governing law, and merger.

         Chris's initial annual salary at CGM was $180, 000. At the end of 2001, no bonus was paid. Chris represents that he asked about the bonus, and Chuck told him that CGM had no earnings so no bonus could be paid. Chris asked to review CGM's books, but Chuck refused. The same thing happened in 2002 and 2003 with Chuck representing that the company was operating without earnings.

         In 2005, Chris again asked about his bonus. CGM gave Chris a check for $5, 000. The subject line on the check said: “2001-2004 (Thanks!).” Chris understood that the check was for his bonuses for those years.^[5] Chuck prepared a spreadsheet to show that CGM was not as profitable as Chris thought it was.

         As the economy generally began to decline in 2006, CGM experienced financial difficulties. For that reason, CGM reduced salaries. On October 1, 2006, Chris's salary was reduced to $125, 000 and his medical benefit plan was also changed. He understood that the reduction was temporary until business improved.

         Chuck told Chris that he and Kevin were making personal financial contributions to CGM and were hoping that the company's finances would improve in the future. Chris understood that everyone was making sacrifices for the good of the company. Chuck said that Chris was the highest paid person at CGM and that Chuck and Kevin were only being paid approximately $86, 000 each. Chris represents that CGM's financial documents, which he has reviewed as part of this suit, show that CGM's annual earnings were much greater than Chuck and Kevin represented them to be.

         In late 2008 or early 2009, Chris thought that CGM's financial status had improved and asked about returning his salary to its former amount. Chuck and Kevin denied Chris's request on the ground that Chris was not maximizing his potential at CGM. In the spring of 2009, Chuck told Chris that he could increase his income by earning commissions. CGM offered commissions to be paid on amounts received from Verizon and FairPoint. During his deposition, Chris agreed that the commissions were a change in his compensation.^[6] CGM paid Chris commissions from 2009 through 2015, with some changes in the commission plan.

         CGM's bookkeeper from 2009 to 2011 testified during her deposition that Kevin told her not to pay Chris his commissions unless he asked for them. When Chris asked for his commissions, he was paid but received them late because of that restriction.

         In June 2012, Kevin informed Chris during a meeting in Georgia that he was an at-will employee. Chris responded that he was not an at-will employee because he had an employment agreement with CGM that provided for $170, 000 in salary, health insurance, and 10% of “annual CGM profit.” Kevin asked Chris to produce the agreement. When Chris returned home, he found the agreement in his files and mailed a copy of the employment agreement to Kevin.^[7] Kevin and Chuck deny that they ever had an employment agreement with Chris.

         In late 2012, Chris asked Kevin for a raise. Chris's salary was raised to $140, 000, but in exchange, his commission percentage was reduced. Chris did not raise the issue of his bonus during the compensation discussions.

         By July of 2014, Chris was dissatisfied with CGM's payment of his commissions. In October of 2014, Chris met with Chuck and Kevin in Georgia. Chuck and Kevin gave Chris options for his compensation and employment at CGM, which involved significant changes in both. A second meeting was scheduled for November 17, 2014.

         Chris states that he was having financial difficulties because of the reduction in his salary and his family's unanticipated medical expenses and that he had “difficulty coming to the conclusion that Kevin and Chuck were lying to me about CGM's finances.” Chris suffered a breakdown in November of 2014. CGM approved a medical leave of absence for him. CGM terminated Chris's employment effective January 31, 2015.

         After his termination, Chris kept the laptop computer that CGM had provided to him, which he had used for both business and personal purposes, and other items related to his work for CGM. Chris understood that the laptop was his, provided as a benefit.^[8]On May 1, 2015, CGM asked Chris to return the laptop and other CGM property. Chris returned other items but did not return the laptop because it held personal confidential information.

         Chris agreed to return the laptop after he removed his personal information, but CGM rejected that proposal. Chris then removed CGM's software and data from the laptop and proposed to keep the laptop with his personal information.^[9] CGM was disappointed that Chris had removed files from the laptop and did not agree to let him keep the laptop.

         Chris and CGM decided to have a company in Boston, Evidox, generate an index of the programs on the laptop. Chris contends that the index was not helpful because it showed hundreds of thousands of programs without sufficient analysis. Chris believed that additional analysis would be expensive and not necessarily productive.

         CGM contends that the Evidox index was extremely revealing because it showed that Chris had opened dozens of CGM files after his termination. Kevin asserts in his declaration that Chris did not have permission to use the laptop after his termination. He reviewed the index and identified thirty-eight files that he believed Chris opened, created, or modified after November of 2014. The files Kevin cites include employment applications and downloads from corporate websites for companies outside of New Hampshire. Kevin does not identify specific CGM files in his declaration. The computer is being stored at Evidox for a monthly fee.

         CGM states in an interrogatory answer that it needs to have Chris's laptop to check and maintain software that was developed or compiled by Chris because that computer is “native to the software.” CGM also states that it had to redirect and educate staff and hire external resources to “rewrite and work around the issues caused by Plaintiff's retention of CGM physical and intellectual property, ” which has cost and continues to cost about $10, 000 to $15, 000 per month. One example CGM provides is that an issue exists for a customer that cannot be resolved without access to Chris's laptop.

         Chris contacted employees at FairPoint Communications, Inc., a CGM customer, to maintain his relationship with FairPoint after he was terminated by CGM. Chris's counsel contacted one of the employees at FairPoint about this lawsuit, specifically seeking information related to CGM's motion to dismiss for lack of personal jurisdiction or to transfer the case to Georgia. FairPoint's attorney contacted CGM, told Chris's counsel he did not want the employee to be deposed, and then told the parties to agree on an affidavit for that employee, which they did. CGM has lost revenue from FairPoint since Chris left.

         For purposes of this suit, Chris retained Paul E. Hendrickson, C.P.A., to calculate the bonus Chris should have received from CGM under the employment agreement. Hendrickson reviewed CGM's financial records, including tax returns, and calculated bonuses for each year from 2001 through 2014.

         Discussion

         Chris seeks summary judgment on his breach of contract claim and on the counterclaims brought against him by CGM. CGM moves for summary judgment in its favor on Chris's claims against it.

         A. Breach of Contract

         “The elements of a breach of contract claim in Georgia are: (1) a valid contract; (2) material breach of its terms; and (3) resultant damages to the party having the right to complain that the contract has been broken.” Fed. Nat'l Mortg. Ass'n v. Prowant, ___ F.Supp.3d ___, 2016 WL 5243409, at *9 (N.D.Ga. Sept. 21, 2016).^[10] Chris alleges that CGM breached Section 2, paragraph 2, of the employment agreement by failing to pay him bonuses. CGM brought a counterclaim for breach of contract against Chris based on an implied contractual duty to deliver to CGM all intellectual property that he developed or modified during his employment and, alternatively, on Section 7 of the employment agreement pertaining to the return of CGM's property.

         1. Chris's Motion for Summary Judgment on his Breach of Contract Claim

         In his breach of contract claim, Chris contends that CGM breached the employment agreement he Dated: May 24, 2001, by failing to pay him bonuses as provided in Section 2, paragraph 2 of the employment agreement. Chris seeks summary judgment in his favor on his breach of contract claim. CGM asserts that Chris cannot prove his breach of contract claim because there was no employment agreement, he suffered no damages, the claim is untimely, ...