text:
    A12A0216.
    GEORGIA DEPARTMENT OF REVENUE v. MOORE.
    (730 SE2d 671)
   Phipps, Presiding Judge.

The Georgia Department of Revenue (hereafter the “Department”) filed this discretionary appeal from the superior court’s judgment, which reversed the Department’s final administrative decision regarding the sales and use tax liability of Richard Moore, a corporate officer. For the reasons that follow, we affirm the judgment of the superior court.

“In reviewing the Department of Revenue’s administrative decision, the superior court determines whether there was any evidence to support the agency’s decision. Upon our review of the superior court’s actions, the evidence is construed in favor of the agency’s decision.” “[0]ur duty is not to review whether the record supports the superior court’s decision but whether the record supports the final decision of the administrative agency.” Our review as to conclusions of law is de novo.

Viewed in the proper light, the record shows that Moore and Thomas Turrentine each owned a partial interest in KTK Restaurant, LLC d/b/a The River Room; Turrentine was the majority owner of KTK Restaurant. In August 2005, a state tax execution was recorded against “Thomas Turrentine [,] KTK Restaurant LLC d/b/a The River Room[,] Personal Liability’ for unpaid taxes for the period beginning July 2000 and ending September 2003.

In November 2006, the Department issued to “Richard T. Moore [,] KTK Restaurant LLC d/b/a The River Room[,] Personal Liability[,] Per OCGA [§] 48-2-52” an Official Assessment and Demand for Payment, seeking $187,221.50 for sales and use taxes which The River Room owed for the period beginning August 2001 and ending September 2003.

In February 2007, Turrentine paid the Department $267,174.67 “for the taxes of KTK Restaurant.” As found by the ALJ (and supported by the testimony of the Department’s witness), “Turrentine’s payment satisfied the assessment against [Moore] In other words, the back taxes assessed against [Moore] had been paid in full.”

In May 2007, Turrentine filed a claim with the Department to obtain a refund of the tax payment, stating that he was not a “responsible person” of KTK Restaurant (within the meaning of OCGA § 48-2-52). After his claim was denied, Turrentine filed a lawsuit against the Department, seeking a refund of the tax payment. Turrentine and the Department settled the refund lawsuit and entered a stipulation/agreement that the Department would pay Turrentine $67,500; the agreement would be conclusive as to any claim or liability related to the $267,174.67 Turrentine paid to the Department; and the agreement would fully resolve Turrentine’s liability “for KTK Restaurant, LLC, d/b/a the River Room for the sales and use tax periods of August 2001, November 2002, December 2002, January 2003, February 2003, March 2003, May 2003, June 2003, July 2003, August 2003, and September 2003.” The Department paid Turrentine as agreed, but continued to demand that Moore pay the assessment for The River Room; rather than demanding the full amount sought in the official assessment ($187,221.50), the Department made an adjustment based on Turrentine’s payment and demanded $72,225 from Moore.

Moore appealed the November 2006 assessment to the Office of State Administrative Hearings. The administrative law judge (“ALJ”) ruled in favor of the Department, concluding that Moore was a “responsible person” pursuant to OCGA § 48-2-52 and that he was liable for The River Room’s taxes. The Commissioner of the Department adopted the ALJ’s initial decision as the Department’s final decision.

Moore appealed the Department’s final decision to the superior court. In reversing the Department’s ruling, the superior court found, inter alia, that the payment the Department received from Turrentine had satisfied the sales and use tax obligation for The River Room for the tax period; the Department had voluntarily returned part of that payment; and the Department was not entitled to pursue Moore for the amount it had elected to return to Turrentine as a refund. The court also enjoined the Department from continuing to seek from Moore payment of the $72,225 assessment.

1. The Department contends that the superior court erred in holding that the Department was pursuing Moore for money it had refunded to Turrentine, when Moore and Turrentine were not liable for the “same taxes” and Moore’s tax obligations were not satisfied by Turrentine’s payment. This argument presents no basis for reversal. OCGA § 48-2-52 provides, in pertinent part:

Any officer or employee of any corporation, ... or any partner or employee of any limited liability partnership who has control or supervision of collecting from purchasers or others amounts required under this title . . . and who willfully fails to collect the amounts or taxes or truthfully to account for and pay over the amounts or taxes to the commissioner, or who willfully attempts to evade or defeat any obligation imposed under this title, shall be personally liable for an amount equal to the amount evaded, not collected, not accounted for, or not paid over.

It is undisputed on appeal that Moore and Turrentine were responsible persons of KTK Restaurant, LLC d/b/a The River Room within the meaning of OCGA § 48-2-52.

The parties have cited, and we have found, no cases specifically-addressing the issue of whether the Department is authorized to collect an assessment of corporate taxes from one responsible person (within the meaning of OCGA § 48-2-52) after it has collected the full amount due from another responsible person and then voluntarily refunded a portion of that payment to the latter person. However, this court has held that because OCGA § 48-2-52 is patterned after the federal statute regarding a corporate officer’s failure to pay taxes (26 USC § 6672) we “may turn to the federal cases for aid in construing [the] statute.”

We find instructive several federal cases, in which courts have held that responsible persons of a corporation are jointly and severally liable for the penalty provided in the federal statute, but that the government is allowed to collect the liability only once. That the government is allowed to collect the liability only once is consistent with Georgia law concerning civil actions, generally, providing that “[a] plaintiff may pursue any number of consistent or inconsistent remedies against the same person or different persons until he shall obtain a satisfaction from some of them,” and regarding contracts, providing that when a creditor releases one person who is bound jointly with or primarily to a debtor, a release of the other liable person results by operation of law.

It bears emphasizing that “[rjevenue laws are neither remedial statutes nor laws founded upon any permanent public policy, and are not, therefore, to be liberally construed; and hence, whenever there is a just doubt, that doubt should absolve the taxpayer- from his burden.”

In this case, the ALJ found as matters of fact that Turrentine’s payment (of $267,174.67) to the Department satisfied the assessment (of $187,221.50) against Moore, and that “the back taxes assessed against [Moore] had been paid in full”; there was evidence to support those findings. The ALJ also found that Moore and Turrentine had agreed that Turrentine would pay the outstanding tax obligations for The River Room in exchange for Moore’s agreement to relinquish his interest in The River Room and another business (which Moore did), so that Turrentine could sell The River Room; this finding is likewise supported by record evidence.

Although the Department takes issue with certain findings of the superior court, on appeal we decide whether the record supports the decision of the administrative agency. Construing the evidence in favor of the agency’s decision, the Department collected payment for the full tax liability of The River Room once, but then entered into an agreement with and voluntarily refunded a portion of the payment to one of the corporation’s responsible persons. We conclude that under these circumstances, the release of and refund payment to Turrentine operated as a release of Moore. The Department’s reliance on Gens v. United States as support for its position that it was authorized to continue its efforts to collect the payment from Moore is misplaced because Gens is factually distinguishable.

Decided July 16, 2012

As pertinently provided in OCGA § 13-1-13,

[p]ayments of claims made through ignorance of the law or where all the facts are known and there is no misplaced confidence and no artifice, deception, or fraudulent practice used by the other party are deemed voluntary and cannot be recovered unless made under an urgent and immediate necessity therefor or to release person or property from detention or to prevent an immediate seizure of person or property. . . .

The Department’s position that OCGA § 13-1-13 does not apply because a specific statute (namely, OCGA § 48-2-35) governs the claim is without merit; OCGA § 48-2-35, which sets forth a taxpayer’s right regarding refunds of taxes erroneously or illegally assessed and collected and delineates the procedures for claiming such a refund, does not address the issues pertinent to this appeal.

By voluntarily paying Turrentine the settlement amount with full awareness of any potential joint claim it had against Moore, the Department forfeited any right it had to recoup from Moore the payment it made to Turrentine. The Department erred in concluding otherwise.

We note that under OCGA § 50-13-19 (h), superior courts are permitted to use their equitable powers to reject or reverse administrative decisions that violate constitutional or statutory provisions, are affected by error of law, or are arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion. The record did not support the Department’s final decision, and the superior court correctly reversed the agency’s decision.

2. The Department challenges the superior court’s finding that “[i]f the Department intended to take this course of action, it should have added Mr. Moore as a necessary party” to Turrentine’s lawsuit. In light of our holding in Division l, as well as our duty on appeal to review whether the record supports the final decision of the administrative agency, we do not address this challenge.

Judgment affirmed.

Ellington, C. J., and Dillard, J., concur.

Samuel S. Olens, Attorney General, Warren R. Calvert, Senior Assistant Attorney General, Frances C. Mulderig, Assistant Attorney General, for appellant.

Cohen, Cooper, Estep & Allen, Jeffrey L. Cohen, Jefferson M. Allen, for appellee.

        Graham, v. Palmtop Properties, 284 Ga. App. 730, 731 (645 SE2d 343) (2007) (citation omitted).

        Grimes v. Catoosa County Sheriff’s Office, 307 Ga. App. 481 (1) (705 SE2d 670) (2010) (citation and punctuation omitted).

        Grimes, supra; Graham, supra; see OCGA § 50-13-19 (h).

       The ALJ indicated that the Department was seeking from Moore a payment of $72,225.

       See Haysman v. Dept. of Revenue, 432 BR 336, 339 (III) (N.D. Ga. 2010) (“Aperson is liable for a company’s unpaid taxes if he is (1) a responsible person who (2) willfully fails to collect and remit... sales taxes____Aresponsible person within the meaning of OCGA § 48-2-52 is one who controls the funds of the company and fails to remit the required taxes.”).

        Blackmon v. Mazo, 125 Ga. App. 193, 196 (1) (a) (186 SE2d 889) (1971).

       See Gens v. United States, 615 F2d 1335, 1339-1340 (II) (Ct. Cl. 1980); Mazo v. United States, 591 F2d 1151, 1157 (IV) (5th Cir. 1979) (responsible persons are jointly and severally liable for the penalty provided in the federal statute; noting, in dicta, that it is “doubtful whether the government may obtain more than one satisfaction of [the tax] liability”); Brown v. United States, 591 F2d 1136, 1143 (IV) (5th Cir. 1979) (“[d]ouble recovery by the government is not necessary to fulfill § 6672’s primary purpose of protection of government revenues”).

       OCGA § 9-2-4.

       See OCGA § 13-4-80; Nannis Terpening & Assocs. v. Mark Smith Constr. Co., 171 Ga. App. 111, 113-114(1) (318 SE2d 89) (1984) (“No matter what right the party wronged may have of electing between remedies or of pursuing different defendants for the same cause of action, when he once obtains full satisfaction from one source, his cause of action ends, and he can assert it no further. If the plaintiff in a suit brought upon a given cause of action accepts a sum of money in full settlement thereof, he can not thereafter set up the same cause of action against another whom he had the election of suing in the first instance.”) (punctuation omitted); Middlebrooks v. Phillips, 39 Ga.App. 263 (146 SE 653) (1929) (where the holder of note accepted a sum of money from one of several joint makers on the note “in full settlement of his liability personally,” the holder could no longer enforce the obligation against the other makers, as the release of one of the persons so jointly liable operated, prima facie, as a release of the others); see Mathis v. Melaver, Inc., 206 Ga. App. 392, 393 (425 SE2d 401) (1992) (where a party is awarded by agreement the full amount of a judgment against co-defendants, and he compromises the award with one set of co-defendants, he cannot attempt to collect the difference between the compromise amount and the full amount of the judgment from the other co-defendants) (physical precedent only).

        Graham, supra at 736 (1) (citation and punctuation omitted).

       See Grimes, supra.

       Supra.

       In Gens, the court held that the government was not obligated to abate penalty assessments made against one taxpayer to the extent it had collected penalty assessments arising from the same tax liabilities from two of his business associates. Id. at 1339 (II). In that case, the government had collected “some” penalty assessments from both of the taxpayer’s former associates. Id. The opinion does not indicate whether the assessments had been paid in full, as occurred in the instant case. Moreover, the Gens court held that the taxpayer was not entitled, at that time, to an abatement when the collection from one of the associates involved other years, the collection from the other associate was the subject of a pending lawsuit, and the government’s right to retain the payment had not been established. Id. at 1339-1340 (II).

       Supra (namely, that the Department’s decision was not supported by the record and was properly reversed).

       See generally Grimes, supra.


source: Caselaw Access Project

author: Phipps, Presiding Judge.

license: Public Domain

text:
    A12A0494.
    SMITH v. LOTT.
    (730 SE2d 663)
   Phipps, Presiding Judge.

After being terminated from employment, Shirley Smith, the former finance director of the City of Albany, filed a lawsuit against Alfred Lott, Albany’s city manager, in Lott’s personal capacity. In her complaint, Smith asserted claims for defamation, intentional infliction of emotional distress, and tortious interference with business/ employment opportunities. Lott moved for summary judgment, and the trial court granted it, finding that suit against Lott was barred by his official immunity.

Smith appeals, contending that Lott was not entitled to official immunity because Lott made some statements with “actual malice” and some statements while he was not acting within the scope of his duties. We see no merit to these claims, and we affirm.

On appeal from the grant of summary judgment this Court conducts a de novo review of the evidence to determine whether there is a genuine issue of material fact and whether the undisputed facts, viewed in the light most favorable to the nonmoving party, warrant judgment as a matter of law.

“The question of whether a government official is entitled to qualified immunity is a question of law for the court to decide.”

The doctrine of official immunity, also known as qualified immunity, offers public officers and employees limited protection from suit in their personal capacity. Qualified immunity protects individual public agents from personal liability for discretionary actions taken within the scope of their official authority, and done without wilfulness, malice, or corruption. Under Georgia law, a public officer or employee may be personally liable only for ministerial acts negligently performed or acts performed with malice or an intent to injure.

“A discretionary act calls for the exercise of personal deliberation and judgment, which in turn entails examining the facts, reaching reasoned conclusions, and acting on them in a way not specifically directed.”

In her complaint Smith asserted that

[w]hen Lott became City Manager, he endeavored to terminate certain City employees in order to replace them with individuals hand-picked by Lott. In removing Smith from her position, Lott wanted the public to perceive that Smith lacked integrity, credibility, and ethics in order to make Smith’s termination appear reasonable and justified. As part of his smear campaign, Lott wrote letters, made public comments, and otherwise published remarks and criticisms about Smith that were misleading and/or false and which Lott knew would be further publicized in the media.

The trial court’s order and judgment on Lott’s motion for summary judgment states that a hearing on the motion was conducted and that the court “considered the full record and all submissions and arguments of counsel,” in rendering its decision. The trial court stated:

It is undisputed in this case that Smith, as the Director of the Finance Department of the City of Albany, was a department head directly accountable to City Manager Lott. Therefore, all disciplinary actions, and Smith’s ultimate termination from employment, were matters left entirely to the discretion of Lott, under both the City Charter of the City of Albany and its personnel ordinance.

Smith does not contest the trial court’s statement. According to the index to the appellate record, the record before this court does not contain a transcript of the hearing on Lott’s motion for summary-judgment or a reasonable substitute therefor, and Smith did not request that the clerk of the trial court transmit to this court a copy of the hearing transcript and any evidence attached thereto. We do not know what arguments and/or stipulations the parties made at the hearing. Thus we will assume in this case that the trial court was correct in stating that there was no dispute regarding Smith’s accountability and Lott’s discretion in disciplinary matters.

Smith set forth in her appellate brief, as well as in her trial court brief in response to Lott’s motion for summary judgment, the circumstances surrounding four incidents from which Lott’s alleged defamatory remarks originated.

Business trip. Smith asserts that Lott “began his [smear] campaign by defaming [her] for attending a .. . business trip authorized by the prior acting City Manager.” She claims that upon her return from an annual business conference in Montreal, Canada, which she had attended for many years, Lott improperly “sanctioned her in a ‘Disciplinary Action’ personnel document” on the ground that her absence was unauthorized.

Smith claims that during an “open/public portion of a City Commission meeting,” Lott commented that her attendance at the conference was an “intentional [ ] attempt [ ] to circumvent . . . policies of the City,” that she had “violat(ed) standards of conduct for Albany Department Heads,” and that her demonstrated behavior could “only be characterized as negligent, disingenuous and the epitome of bad judgment.”

Smith asserts that although Lott claimed that he did not know about her plans to attend the conference beforehand, “[i]t is clear, though, that Lott knew about Smith’s intention to travel to the conference before it occurred. . . .” Smith claims that Lott knew because his administrative assistant, who traveled with Smith on the trip, testified that “when Lott came on board,” she had “mentioned the fact that [she traveled with Smith] from time to time to [the] conferences,” she told Lott that the next conference was going to be in Montreal, and Lott had joked with her to “brush up on her French.”

But Smith deposed that she did not inform Lott that she was going on the business trip. And the record shows that although Smith obtained written authorization from the prior acting city manager to attend the conference, she did not request that the authorization be filed with the city manager’s office. And Lott’s administrative assistant deposed that although she had mentioned to Lott that she sometimes traveled with Smith to the conference, in this instance, she did not tell Lott with whom she might travel to the conference, and Lott did not ask; the trip was a personal one for the assistant.

Therefore, concluding that Smith’s absence was unauthorized, Lott disciplined Smith by issuing a Disciplinary Action report which was placed in Smith’s personnel file and copied to Smith; and by suspending Smith for four days without pay. Smith then filed a written response to the disciplinary report, and it was also placed in her personnel file. Through an Open Records Act request, a local newspaper obtained the documents, and excerpts from the documents appeared in its papers.

Investigation of finance department. Smith asserts that “Lott next undertook to attack [her] by conducting a sham ‘needs analysis’ investigation of the Finance Department.” Smith claims that “[a]t Lott’s direction,” the individual Lott hired to conduct an investigation of the department “caused the report to”: (1) accuse Smith of having “directed her employees to break the law by directing her employees to pick up her children from school or other personal tasks during working hours”; and (2) conclude that Smith’s actions were considered a crime known as “theft of services.”

But the record shows that employees and former employees of the finance department reported to Lott their concerns about Smith’s lack of preparedness for an upcoming audit; Smith’s lack of effort to replace the department’s accounts payable manager; and Smith’s unfair treatment of some staff members.

As a result of the reports, Lott engaged the services of an individual (“assessor”) to conduct a management assessment of the finance department. Some of the objectives of the assessment were to assess the leadership climate of the finance department, assess the department’s readiness and preparedness for an upcoming audit, investigate the reasons behind employees leaving the department, investigate allegations of retaliation and vindictiveness by Smith, investigate allegations of favoritism toward certain employees by Smith, assess the department’s ability to manage accounts payable and receivable, and make a written review of the assessment.

Pursuant to that engagement, in August 2006, the assessor interviewed employees of the finance department. During those interviews, some employees reported that Smith had required them to pick up her children from school and to perform other personal tasks, errands, and favors for Smith and her children during normal work hours and in city-furnished vehicles; the assessor deposed that she relayed this information to Lott. Lott deposed that he consulted the city attorney regarding Smith’s use of employees for personal matters and her use of city-furnished vehicles for personal errands, and that the city attorney told him that Smith’s conduct constituted the crime of theft of services. The assessor deposed that Lott mentioned the term “theft of services” to her during one of her briefings to him.

The assessor included in her written report that Smith “directed her employees to break the law by directing [them] to pick up her children from school or [perform] other personal tasks during work hours. This is considered ‘Theft of Service.’ ”

The City of Albany’s police department later conducted an investigation of the allegations against Smith for her use of city vehicles and employees to perform personal tasks, errands, and favors; after conferring with the district attorney’s office, “it was determined that there [was] not enough evidence to pursue a criminal charge to a successful conviction.”

Lott’s termination of Smith. Smith asserts that when she met with Lott and he told her that her employment with the city would be terminated unless she resigned, Lott “further threatened” her that if she did not resign, she would go to jail.

Smith deposed that, in a nonpublic meeting, Lott offered her an opportunity to resign instead of being terminated; he told her that in that event, the assessor’s findings would not be reduced to writing. Lott deposed that he explained to Smith that if the report was reduced to writing it would be “subject to a media request.” Lott deposed that when he gave Smith the option to resign or be terminated, he also informed Smith that the assessor’s findings showed that she had used employees for personal matters, while they were on duty, and that she had directed employees to pick up her children in government-owned cars and drive them to different places. But Smith requested that the assessor’s findings be reduced to writing and a copy provided to her before she made a decision regarding resigning. Accordingly, the assessor submitted written reports that were required to be presented in an open meeting to the city commission and mayor; Smith did not resign, and Lott terminated her employment.

Concerning the letter of termination issued by Lott, Smith asserts that she “contest [ed] the truth of Lott’s statements” that she had committed “flagrant violations of personnel policies” and exhibited a “lack of respect for Georgia law.”

Smith’s Orlando job search. Smith asserts that after her employment with the City of Albany was terminated, she interviewed for a job with the City of Orlando. Smith claims that the interview went well, but that she was “passed over” after Lott transmitted by facsimile the assessor’s report and disciplinary personnel documents to the interviewer, Raymond Elwell.

Elwell deposed that Smith informed him that she had been terminated from employment with the City of Albany. During the job interview, Smith volunteered her perspective of the issues involving her termination. She claimed she had been “targeted” for termination and she disputed the reasons for the termination. Elwell informed Smith that he would follow up with Lott to get the City of Albany’s perspective concerning the termination.

Elwell deposed that he spoke on the telephone with Lott about Smith’s performance and termination. Lott told him that Smith had been “terminated for malfeasance ... she abused some employees ... [and] used some employees for personal gain.” Elwell submitted an Open Records Act request and obtained a copy of the assessor’s report. Smith was not offered the job.

The former human resources director for the City of Albany swore by affidavit that “[i]t was [the city’s] practice,” not to provide any information about a particular employee other than the employee’s dates of service with the city and job title absent a signed authorization to release personal information. But that director had retired from her position with the city prior to Lott’s disciplinary action against and termination of Smith, and she admitted that there was no policy that required Lott to obtain a written authorization to release personal information.

1. In her appellate brief, Smith lists two statements that she contends were defamatory and were “not made in the course of Lott’s duties,” such that immunity did not attach to them to bar her claims.

Smith claims that Lott made the first of these statements for a news story that was published on a television news website. The statement was that “my concerns are about the integrity of the organization, the ethics of the organization, and looking out for my employees. . . .” Smith asserts that the second statement, made to Elwell, was that Smith was “terminated for malfeasance,” that there was “evidence and corroboration” that Smith had “abused some employees,” and that there was evidence Smith “had used some employees for personal gain.”

Concerning the first statement, Smith does not cite any authority to support her position that this statement Lott made to the media after his discussions with the mayor and board of commissioners was outside the scope of his authority. Smith cites no authority to support her argument that a public official who acts when there is no specific duty to act, acts outside his authority. Indeed, taking action in this manner is, in part, what Lott was authorized to do in his discretion.

Concerning the second statement, Lott did not verbally disclose anything to Elwell that Elwell did not otherwise obtain through his Open Records Act request for information from Smith’s personnel file regarding her termination. And where a “personnel report is written by a supervisor who has the duty to write the report and it is sent to the keeper of personnel records, there is no publication of that report, and any allegedly defamatory material contained therein, no matter how malicious, is not actionable.” Although at one point the city may have had a practice of not releasing personnel information absent a signed release of information form by the employee, the record showed that no policy existed that prohibited Lott from verbally responding in conjunction with his response under the Open Records Act.

The trial court did not err in holding that suit was barred against Lott as to these statements.

2. Smith contends that because Lott made some statements with actual malice, the trial court erred in finding that he was entitled to official immunity as to those statements.

(a) As an initial matter, Smith asserts that the applicable “actual malice” standard is that which “arises out of First Amendment jurisprudence and requires that a public figure [as herself] making a claim for defamation show that the defendant made the statements at issue with knowledge of their falsity or with reckless disregard for the truth.”

“[I]n the context of official immunity, ‘actual malice’ requires a deliberate intention to do wrong.” “A ‘deliberate intention to do wrong’ such as to constitute the actual malice necessary to overcome official immunity must be the intent to cause the harm suffered by the plaintiffs.” “Actual malice” as it applies to official immunity, set forth in the 1991 amendment to Art. I, Sec. II, Par. IX of the Constitution of the State of Georgia, denotes “express malice or malice in fact,” and not the “first amendment definition of ‘actual malice’.. . which is unique to constitutional libel law... .” In other words, “ ‘[a]ctual malice,’ as that term is used in the constitutional provision . . . does not include ‘implied malice,’ i.e., the reckless disregard for the rights or safety of others.” Thus, contrary to Smith’s argument, the First Amendment standard of “actual malice” is not applicable here.

(b) In her appellate brief, Smith describes nine statements that she alleges were defamatory and were “made in the course of Lott’s official duties, but to which immunity does not apply due to actual malice and intent to harm.”

As described by Smith, the complained-of statements were as follows:

[1.] Lott’s statement at [a city commission] meeting, as reported in [an]... article in [a local newspaper], that Smith had demonstrated behavior that “can only be characterized as negligent, disingenuous, and the epitome of bad judgment.”
[2.] In a second article in [a local newspaper], . . . Lott was reported to have publicly declared his lack of confidence in Ms. Smith’s abilities as finance director. The article further refers to Mr. Lott’s chastisement of Ms. Smith in public settings for not being certified in her field (though she is).
[3.] Lott stated to [the assessor], . . . that because of Smith, “good employees (were) leaving the department,” that Smith was guilty of “blatant retaliation and vindictiveness,” and that Smith “blatantly (showed) favoritism to certain employees to the detriment for the mission.”
[4.] Lott told [the assessor] that Smith was guilty of the crime of “theft of services.” This statement was repeated in the report generated and published by [the assessor].
[5.] In an open meeting, Lott referred to Smith and her performance as a “horrific situation.” Lott also stated that Smith’s attendance at the [business] conference . . . was an “unauthorized absence” that presented an “integrity/ethical problem.”
[6.] Lott... stated in the public meeting that though he had been concerned that Smith’s treatment of an employee was “racially motivated,” his conclusion was that “the Director retaliated against everyone regardless of race” and “the circumstances were widespread and outrageous.”
[7.] Lott further stated that “after realizing there existed clear violations of criminal law ... he saw that he had to transition to greater level.”
[8.] An article appearing in [a local newspaper] . . . , regarding Smith’s termination quoted Lott as follows: “I expect I would find possibly some slight policy violations ... I had no idea the circumstances were as widespread and outrageous as they were.”
[9.] Lott issued a letter, with a copy to be placed in Smith’s personnel file (a public record), informing Smith that she would be terminated . . . for among other things, “flagrant violations of personnel policies” and “lack of respect for Georgia Law.”

Concerning the first statement, Lott deposed that the statement was an accurate reflection of a comment he wrote in the disciplinary report he had issued to Smith that was placed in Smith’s personnel file, and of which the local newspapers obtained a copy under the Open Records Act. Concerning the ninth statement, the termination letter was also contained in Smith’s personnel file. These statements were not actionable.

Concerning the second statement, Lott deposed that he did not make any statement to the newspaper chastising Smith for not being certified in her field. The record contains no information from any news reporter about the source of the statement.

What is published in a newspaper can not be received as being the act of another person, not shown to have had any connection with the publication of the paper, or to have authorized or ratified the publication of the article; nor is it alone evidence that such other person made statements so published. For such [words] to have furnished evidence against [Lott], there should have been some evidence connecting [him] therewith. ... [T]he mere appearance of such [words] in its columns is not of itself proof as to who caused its publication.

Concerning the third and fourth statements, Smith did not provide citations to the record that show that Lott made these statements to the assessor. And our review of the record reflects that Lott hired the assessor to investigate the finance department, and in doing so, he communicated to the assessor his concerns and objectives for an investigation. Thus, Smith has not shown a deliberate intention to do wrong or intent to cause the alleged harm suffered by Smith.

Concerning the sixth statement, contrary to Smith’s assertion, the minutes of the public meeting did not reflect that it was Lott’s conclusion that Smith retaliated against employees regardless of race. The minutes reflected that an employee made this statement to Lott.

Concerning the fifth, seventh, and eighth statements, the record showed that they were the product of reasoned conclusions reached by Lott from personal observations, careful deliberation, and as a consequence of information learned from an assessment of Smith and the department’s performance; and not a deliberate intention to do wrong or intent to cause the alleged harm suffered by Smith.

Decided July 16, 2012.

Moorman Pieschel, Christopher G. Moorman, for appellant.

Gardner, Willis, Sweat & Handelman, Donald A. Sweat, for appellee.

Accordingly, Smith’s argument is without merit. The trial court properly determined that Lott was entitled to summary judgment based on his official immunity from liability as to all of Smith’s claims for defamation, intentional infliction of emotional distress, and tortious interference with business/employment opportunities.

Judgment affirmed.

Ellington, C. J, and Dillard, J., concur.

        Giles v. Swimmer, 290 Ga. 650, 651-652 (1) (725 SE2d 220) (2012) (citation and punctuation omitted).

        Conley v. Dawson, 257 Ga. App. 665, 666, 668 (2) (572 SE2d 34) (2002) (punctuation and footnote omitted).

        Cameron v. Lang, 274 Ga. 122, 123 (1) (549 SE2d 341) (2001) (punctuation and footnotes omitted); Owens v. City of Greenville, 290 Ga. 557, 561 (3) (b) (722 SE2d 755) (2012) (immunity applied to official act of city mayor); Oglethorpe Dev. Group v. Coleman, 271 Ga. 173 (2) (516 SE2d 531) (1999) (immunity applied to official act of city mayor); Ga. Const. of 1983, Art. I, Sec. II, Par. IX (d); OCGA § 36-33-4 (“[0]fficers of a municipal corporation shall be personally liable to one who sustains special damages as the result of any official act of such officers if done oppressively, maliciously, corruptly, or without authority of law.”).

        Todd v. Kelly, 244 Ga. App. 404, 406 (1) (535 SE2d 540) (2000) (punctuation and footnote omitted).

       See Lowry v. Norris Lake Shores Dev. Corp., 231 Ga. 547, 548 (203 SE2d 169) (1974) (affirming grant of summary judgment where the appellate record did not contain a transcript of evidence considered by trial court on motion and appellant did not request that a transcript of the proceedings be filed for inclusion of record on appeal; holding that court must necessarily assume trial court was correct in its findings); compare Sapp v. Canal Ins. Co., 288 Ga. 681, 686 (3) (706 SE2d 644) (2011) (a transcript of the hearing on motion for summary judgment is not always necessary to resolve appeals arising from a trial court’s determination on summary judgment; “[wjhere, as here, all evidence was submitted to the trial court in advance of the hearing as required under OCGA § 9-11-56 (c), . . . and the hearing consisted simply of oral argument based on evidence already submitted, a transcript of proceedings is not required to enable meaningful appellate review”).

       The police department made this determination seven months after Smith was terminated from her employment.

       See OCGA §§ 50-14-1 (a) (1) (B); 50-14-3 (6).

        Purvis v. Ballantine, 226 Ga. App. 246, 249-250 (3) (487 SE2d 14) (1997) (holding that a school superintendent was a public official where evidence showed that he was the school’s chief executive and operating officer, and that he kept the public informed about the operation of the school system and was routinely interviewed by the newspapers about the status of the school system); Barr v. Matteo, 360 U. S. 564, 574-575 (79 SC 1335, 3 LE2d 1434) (1959) (under certain circumstances, a publicly expressed statement of the position of the head of an agency, in reference to charges that have been widely disseminated to the public, is an appropriate exercise of the discretion which the officer must possess to function effectively).

       See “Open Records Act,” OCGA § 50-18-70 et seq.

        Cartwright v. Wilbanks, 247 Ga. App. 187, 189, 190 (3) (541 SE2d 393) (2000) (footnote omitted); McDonald v. Few, 270 Ga. App. 671, 673 (3) (607 SE2d 265) (2004); Kurtz v. Williams, 188 Ga. App. 14, 16 (3) (371 SE2d 878) (1988); Luallen v. Home Mission &c. Convention, 125 Ga. App. 456, 460 (2) (188 SE2d 138) (1972).

        Conley, supra at 667-668 (2) (footnote omitted).

        Murphy v. Bajjani, 282 Ga. 197, 203 (4) (647 SE2d 54) (2007).

        Merrow v. Hawkins, 266 Ga. 390, 391-392 (2) (467 SE2d 336) (1996).

        Murphy, supra (citation and punctuation omitted).

       See Cartwright, supra; McDonald, supra; Kurtz, supra; Luallen, supra.

        Falls City Mfg. Co. v. Athens Coca-Cola Bottling Co., 130 Ga. 559, 562-563 (61 SE 230) (1908).

       See Marshall v. Browning, 310 Ga. App. 64, 67-69 (712 SE2d 71) (2011); Todd, supra at 406-407 (1) (though officer’s actions in seeking warrants, which were later dismissed, were misguided, there was no evidence that they were taken with actual malice); Purvis, supra at 250-251 (3); Teston v. Collins, 217 Ga. App. 829, 830 (1) (459 SE2d 452) (1995) (a discretionary act calls for the exercise of personal deliberation and judgment, which in turn entails examining the facts, reaching reasoned conclusions, and acting on them in a way not specifically directed).

       See generally Purvis, supra; Davis v. Standifer, 275 Ga. App. 769, 773 (1) (a) (621 SE2d 852) (2005) (where alleged tortious conduct arose from an incident occurring during the performance of officer’s official duties, officer was cloaked with official immunity from suit, and all of plaintiff’s state law claims, including plaintiff’s state constitutional claims that arose out of the same allegations of underlying tortious conduct were barred).


author: Barnes, Presiding Judge.

text:
    A12A0527.
    CONTRACT FURNITURE REFINISHING & MAINTENANCE CORP. OF GEORGIA v. REMANUFACTURING & DESIGN GROUP, LLC et al.
    (730 SE2d 708)
   Barnes, Presiding Judge.

Contract Furniture Refinishing & Maintenance Corp. of Georgia d/b/a The Refinishing Touch (“TRT”) sued former employee Scott Deutsch for numerous claims, including misappropriation of trade secrets and unfair competition, and Deutsch counterclaimed for fraud and breach of contract. The trial court granted partial summary judgment to Deutsch, denied summary judgment to TRT on Deutsch’s counterclaim, and granted Deutsch’s motion to compel discovery. For the reasons explained below, we affirm in part and reverse in part.

Summary judgment is appropriate when there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law. OCGA § 9-11-56 (c). On appeal from the grant or denial of summary judgment, we apply a de novo standard of review, and view the evidence, and all reasonable conclusions and inferences drawn from it, in the light most favorable to the nonmovant. Benton v. Benton, 280 Ga. 468, 470 (629 SE2d 204) (2006).

So viewed, the record shows that in about 1984, Deutsch began working as a subcontractor for Contract Furniture Refinishing & Maintenance Corp., a furniture refinishing business incorporated in Ohio and run by Mario Insenga. In 1989, Insenga gave Deutsch 50 shares of stock in the company, which represented ten percent of the outstanding stock. Deutsch testified that Insenga “volunteered” to give him ten percent of the Ohio company “out of the blue” and “out of gratitude” because Deutsch sold a $900,000 project. He admitted that he made no specific promise to do anything in exchange for the interest, explaining, “He knew I was gonna do something. I did something every day. I didn’t have to be asked to do it.” Deutsch acknowledged that he knew the stock certificate was for the Ohio corporation, and that afterward Insenga incorporated TRT in Georgia.

After eight years as a subcontractor, in 1992, Deutsch entered into an employment agreement with TRT, under which he was paid 30 percent of the “gross proceeds” from any project he directed. “Two or three” years later, before the mid-1990s, his compensation changed to a base salary plus ten percent of any project he sold, and a year or two after that he began receiving only a base salary with no sales commissions. After he began receiving only a base salary, Deutsch began “pressing for an agreement, for a contract, something for that,” because he wanted “[a] legal document showing ownership in the company,” but Insenga refused to give him any kind of written document. Deutsch asserted that Insenga told him that his ten percent was still valid for the Georgia corporation and repeatedly told him for twenty years that he had “a ten percent interest in this company,” which is why he “stuck around for 20 years.” Deutsch admitted that he did nothing specific in exchange for an ownership interest, stating he “had already earned it and I continued to earn it every day.” According to Deutsch, Insenga “wanted to keep [him] in the company. That was the bait. It worked.”

Although Deutsch continued to ask Insenga to put their agreement in writing, Insenga refused. Deutsch acknowledged that he “didn’t discuss shares” of the Georgia corporation with Insenga because “[a]t that point it was just a straight 10 percent of the entire company, which at that point was a lot bigger than he and I and a one-room thing.” Insenga never denied the agreement; instead, “[h]e would just get into a rage and storm off, yelling and screaming, and then the next time you saw him he would act like nothing happened.” According to Deutsch, Insenga said he did not want any-written agreements for “banking reasons,” because Deutsch’s credit would hinder Insenga’s ability to get a line of credit. Deutsch testified that Insenga would also become “mad because I didn’t trust him” by asking for the agreement in writing.

In September 2008, John Ferguson suggested to Deutsch that they form their own business, and shortly thereafter, Deutsch met with an investor, Richard Craven, to discuss creating the business. On October 17, 2008, while Deutsch was still employed by TRT, Deutsch, Craven, and Ferguson signed an operating agreement for Remanufacturing & Design Group, LLC (“RDG”). Under this agreement, Deutsch, Craven, and Ferguson each owned one-third of the company. Deutsch admitted that he did not immediately resign from his employment with TRT or inform Insenga about the new company. Deutsch’s role in the new company was to run operations beginning on October 17, 2008, and Ferguson was to handle sales. Four months later, on February 18, 2009, Deutsch resigned from his employment with TRT and left his company-issued truck, cell phone, laptop, and resignation letter, at the home of TRT’s operations manager.

On April 7, 2009, TRT filed suit against Deutsch, raising multiple claims, and Deutsch counterclaimed, seeking damages for fraud, breach of contract, punitive damages, and attorney fees. Both parties subsequently moved for summary judgment. The trial court granted partial summary judgment to Deutsch on TRT’s claims related to trade secrets, and denied summary judgment to TRT on Deutsch’s counterclaims. Numerous claims against Deutsch remain pending.

1. TRT contends that the trial court should have granted it summary judgment on Deutsch’s fraud and breach of contract claims because the terms of any agreement under which Deutsch would receive ten percent of the company were too indefinite to constitute a binding contract, and because the statute of limitation had run.

Under Georgia law, a contract does not exist unless the parties agree on all material terms. A contract cannot be enforced if its terms are incomplete, vague, indefinite or uncertain. Thus, a court will not enforce an agreement where it is left to ascertain the intention of the parties by conjecture.

(Citation, punctuation and footnote omitted.) Kitchen v. Insuramerica Corp., 296 Ga. App. 739, 743 (1) (675 SE2d 598) (2009). In this case, TRT argues, the parties did not discuss the form of Deutsch’s ownership, such as a percentage of profits or shares of stock. If his ownership was to consist of stock shares, TRT argues, the parties did not agree on the number and class of shares he would receive, whether they would come from the company or from Insenga, or address when the shares would be issued to Deutsch.

Regarding ownership interest in a corporation, this court has held that an oral promise to give a certain percentage of ownership interest in a company may be too indefinite to be enforced, such as when the corporate structure has not been determined or the source of the stock was not specified. Massih v. Mulling, 271 Ga. App. 685, 687 (1) (610 SE2d 657) (2005); Key v. Naylor, 268 Ga. App. 419, 425-426 (3) (602 SE2d 192) (2004). On the other hand, we have held that a written agreement to transfer a 25 percent equity interest in two subsidiary companies in exchange for the employee performing a specific job at a specific salary was sufficiently detailed to obligate the parent company to issue 25 percent of the subsidiaries’ outstanding stock to the employee. Kitchen, 296 Ga. App. at 745 (1).

Assuming without deciding that Insenga’s promise to give Deutsch ten percent of the company was definite and enforceable, however, Deutsch’s counterclaim is foreclosed by the running of the statute of limitation.

The applicable statute of limitation for an oral contract is four years. OCGA § 9-3-25. Deutsch testified that Insenga’s promise of an interest in the company was “the bait” that kept him working for TRT for 20 years. He argues that “the stock was to be issued each time promised” and that the statute began running anew with each promise. Because Insenga had repeated his latest promise less than four years before Deutsch brought his counterclaim, Deutsch argues, the statute of limitation on his claim has not run.

In determining whether the statute of limitation provides a bar to this action the court must decide when the statutory period began to run. [Deutsch’s counterclaim] makes no reference to a date by which [Deutsch] was to receive such stock and ... a corporation can issue stock at any time.

Palmer v. Neal, 602 FSupp. 882, 886 (N.D. Ga. 1984).

It has been long recognized and is well established that a statute of limitation begins to run on the date a cause of action on a claim accrues. In other words, the period within which a suit may be brought is measured from the date upon which the plaintiff could have successfully maintained the action.

(Citation and punctuation omitted.) Jankowski v. Taylor, Bishop & Lee, 246 Ga. 804, 805 (273 SE2d 16) (1980); see also Kueffer Crane & Hoist Svc. v. Passarella, 247 Ga. App. 327, 329 (2) (543 SE2d 113) (2000); Leathers v. Timex Corp., 174 Ga. App. 430, 431 (2) (330 SE2d 102) (1985) (suit by former employee who alleged entitlement to certain retirement benefits under oral agreement barred by statute of limitation).

In Kueffer Crane, a former employee sought a declaratory judgment that he was a five percent owner of his former employer, contending that the company had induced him to come work for it seven years earlier by promising him the ownership. 247 Ga. App. at 329. The company paid him five percent of its profits for five years, but the next year the owner denied that the employee had any ownership interest and refused to pay him five percent of the profits. Id. In response to the employee’s petition, the company argued that the statute of limitation began to run when it first refused the employee’s request for stock certificates in 1992. Id. Noting that “one may have an ownership interest in a corporation without having received stock certificates,” we held that the agreement was -not breached until the company refused to pay the employee his profit share. Id. Because the employee filed suit within four years of the breach, his claim was not foreclosed by the running of the statute of limitation. Id. at 329-330.

In contrast, Deutsch asked Insenga for “[a] legal document showing ownership in the company” when he stopped receiving commissions and began receiving only a base salary, which according to his testimony would have been in 1997 at the latest. Absent a specified time in the agreement about when Insenga was going to memorialize in writing Deutsch’s ten percent interest in the company, Deutsch’s right of action accrued either when Insenga first agreed to give Deutsch ten percent of the company, as was the case in Palmer, 602 FSupp. at 886, or when Deutsch’s compensation changed to only a base salary and Insenga refused to give him a written document of any kind. Under either scenario, Deutsch’s breach of contract action is barred by the running of the four-year statute of limitation.

The statute of limitation being four years also for fraud claims, that cause of action is also barred. Shapiro v. Southern Can Co., 185 Ga. App. 677 (365 SE2d. 518) (1988). Accordingly, the trial court erred in denying summary judgment to TRT on both of Deutsch’s counterclaims.

2. Based upon our holding in Division 1, we need not address whether Deutsch’s fraud and breach of contract claims also fail because the agreement was too indefinite or lacked consideration, or that Deutsch did not justifiably rely on the promise.

3. Our holding in Division 1 also compels us to vacate the trial court’s order granting Deutsch’s motion to compel discovery about the value of TRT. Santasiero v. Abernathy, 304 Ga. App. 569, 571 (1) (696 SE2d 352) (2010) (subpoena enforcement issue moot based upon lack of existing controversy between the parties following settlement). For the same reason, we also reverse the denial of summary judgment to TRT on Deutsch’s derivative claims for punitive damages and attorney fees. ULQ, LLC v. Meder, 293 Ga. App. 176, 182 (4) (666 SE2d 713) (2008) (claims for punitive damages and attorney fees fail based upon grant of summary judgment on underlying liability claim).

4. In its remaining enumerations of error, TRT asserts that the trial court erred by granting summary judgment to Deutsch on its claims for misappropriation of trade secrets and breach of the confidentiality provisions of his employment contract with regard to trade secrets. The trial court granted summary judgment in Deutsch’s favor based upon its conclusion that TRT “failed to establish it has trade secrets and further that it has failed to adequately protect as confidential the information Plaintiff considers trade secrets.”

In its briefs to this court, TRT asserts that “the trade secrets alleged in this case are the several thousand pages of recaps provided to Deutsch” during his employment with TRT. In support of its claim for trade secret misappropriation, TRT points to two successful bids made by RDG (Comfort Inn, West Virginia and Doubletree, Ohio) after TRT provided Deutsch with information about leads for the work. It also points to evidence regarding the connection of a flash drive between Deutsch’s personal computer and his company-issued laptop the day before he resigned.

The custodian of records for TRT, Amy Parson, provided an affidavit in which she explained that during Deutsch’s employment with TRT, he was provided with “Sales and Contracting Department Recap reports” as well as “Marketing Department Recap reports.” According to Parson, the sales recap reports included “proprietary and trade secret information including a listing of [TRT]’s customers, customer contact information, customer leads, and customer quote amounts.” The marketing recap reports contained “proprietary and trade secret information including a listing of [TRT]’s customers, customer contact information, new customer leads, and contact information for customer leads and prospective customers.”

On September 19, 2008, Parson sent an e-mail to Deutsch that included a sales recap report for the week of September 15,2008. This report included the following information about Comfort Inn Cross Lanes, West Virginia, a prospective customer:

the prospective customer name, the TRT proposal number assigned to the prospective customer, the contact person for the prospective customer, the type of project, information concerning the local area representative, the specific dollar amount of TRT’s quote to the prospective customer and notes concerning the dates of communication of TRT’s quote to the prospective customer.

Deutsch was also provided access to the marketing recap report for the week of September 8, 2008. The listing for the Comfort Inn Cross Lanes, West Virginia, included some of the same information as the September 19 report:

a listing of the prospective customer name, the contact name, phone number and email address of the prospective customer contact, the name of the owner of the prospective customer contact, the origination of the prospective customer lead, the type of project[,] and notes on communications and activity concerning the prospective customer lead.

TRT sent a proposal to the Comfort Inn Cross Lanes, West Virginia on September 17, 2008. On October 28, 2008, Deutsch’s newly formed company, RDG, sent a proposal to the same prospective customer that according to Insenga was “essentially the same as TRT’s . . . except for the difference in unit price.” At the time this proposal was sent, Deutsch was still employed by TRT. A couple of weeks after RDG bid on the job, Deutsch stopped by to look at the project and spoke with the general manager on RDG’s behalf. According to Deutsch, the client obtained six bids on the job and awarded it to RDG “because we’re the only people who came by.”

On February 6,2009, Parson sent an e-mail to Deutsch including the sales recap for the week that included information about a prospective customer, Doubletree Columbus, Ohio. A marketing recap report in early February 2009 also included information about this prospective customer. On February 5, 2009, TRT sent a proposal to this customer, and on February 26, 2009, RDG sent an identical proposal with a different unit price to the same prospective customer.

Finally, TRT inspected the TRT laptop returned by Deutsch after he resigned on February 18, 2009, and discovered that it had been

stripped of all of TRT’s proprietary and trade secret files, including but not limited to emails sent to Deutsch during his employment containing TRT’s listing of customers and prospective customers, TRT’s job quotes, TRT’s inventory lists, TRT’s customer leads and TRT’s pricing lists and pricing information.

On February 24, 2009, TRT sent a letter to Deutsch demanding that he return “any and all of TRT’s proprietary and trade secret computer data and documentation” by February 27,2009. Acomputer forensics investigator examined the hard drive image of Deutsch’s TRT laptop and Deutsch’s personal laptop, apparently purchased by as early as February 5, 2009, and discovered that a flash drive, a device often used to store and move files from one computer to another, had been first connected to both of these computers on February 17, 2009, the day before Deutsch resigned from TRT.

In his deposition, Deutsch testified that he did not retain hard copies of any recap reports provided to him during weekly meetings at TRT. He denied downloading or saving to his computer’s hard drive any e-mail attachments sent to him by TRT, copying any files from his laptop to a flash drive or CD, giving any TRT company information to anyone at RDG, disclosing TRT information to anyone unless it related to work he performed for TRT, or retaining or possessing any TRT information or paper files after he resigned from TRT on February 18, 2009.

With regard to the Comfort Inn Cross Lanes, West Virginia job, Deutsch testified that Ferguson obtained this job after “[w]e went on the Internet. I showed him how to look up purchasing companies, management companies, hotel companies, lists. He made cold calls, we sent letters, memos out in the field.” Deutsch denied hearing about this hotel before Ferguson obtained the job, denied reading about leads in recap reports provided to him by TRT, and denied receiving any recap reports listing this hotel.

According to Ferguson, the Comfort Inn, West Virginia job was obtained by Ryan Jacobs, whom he described as Craven’s representative with regard to Craven’s ownership interest in RDG and to whom he was required to make weekly reports about his marketing efforts. Jacobs, on the other hand, testified that Ferguson first informed him of the Comfort Inn lead, but he did not know how he obtained it. Jacobs denied ever seeing a TRT bid for the same job, and explained that most of Ferguson’s “leads come from email and online. There are also publications in the industry that will physically, in their magazines, print out lists of hotel owners, management... that sort of thing, so [the Comfort Inn lead] could have come from any of those.”

With regard to the Doubletree, Columbus, Ohio bid, Jacobs testified that Deutsch contacted a manager for the owner after quitting his job with TRT, who then contacted Jacobs about providing a bid. According to Jacobs, the client provided Deutsch with a copy of TRT’s bid by e-mail, and the record includes a copy of this e-mail.

Having reviewed the evidence supporting TRT’s trade secret claims in the light most favorable to TRT, we must now determine whether this evidence presents any genuine issue of material fact. To recover under the Georgia Trade Secrets Act of 1990, OCGA § 10-1-760 et seq., TRT must demonstrate that its recap reports are a trade secret as defined by OCGA § 10-1-761 (4) and that Deutsch misappropriated these trade secrets. Hilb, Rogal & Hamilton Co. &c. v. Holley, 284 Ga. App. 591, 597 (4) (644 SE2d 862) (2007). Based upon our conclusion below that TRT has failed to demonstrate a genuine issue of material fact with regard to the misappropriation element of its claim, we need not address whether the trial court erred by granting summary judgment in favor of Deutsch with regard to other elements of its trade secrets claims. Rachels v. Thompson, 290 Ga. App. 115, 117 (658 SE2d 890) (2008) (affirming grant of summary judgment under “right for any reason” rule).

OCGA § 10-1-761 (2) provides a definition of “misappropriation” for purposes of the Georgia Trade Secrets Act of 1990 and the only portion of this definition with potential application to the facts at issue here follows:

“Misappropriation” means . . . [disclosure or use of a trade secret of another without express or implied consent by a person who:... [a]t the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was . . . [a]cquired under circumstances giving rise to a duty to maintain its secrecy or limit its use.

OCGA § 10-1-761 (2) (B) (ii) (II):

In this case, TRT presents only circumstantial evidence to support its allegation that Deutsch disclosed or used its trade secrets. Specifically, the timing of the recap reports that were provided to Deutsch compared to the timing of RDG’s competitive bids to two customer leads included within the reports, as well as the timing of when a flash drive was connected to both Deutsch’s personal laptop and TRT’s laptop that was later missing data. Deutsch, on the other hand, testified unequivocally that he did not use or disclose any trade secrets provided to him by TRT, and presented evidence showing how RDG could have independently bid upon the Comfort Inn j ob and that the Doubletree client provided RDG with a copy of TRT’s bid.

In ruling on a motion for summary judgment, a finding of fact that may be inferred from, but is not demanded by, circumstantial evidence has no probative value against positive and uncontradicted evidence that no such fact exists, provided that the circumstantial evidence may be construed consistently with the direct evidence.

White v. Shamrock Bldg. Systems, 294 Ga. App. 340, 344 (1) (669 SE2d 168) (2008). In this case, while TRT has produced strong circumstantial evidence that Deutsch may have used or disclosed its alleged trade secrets, this evidence is also consistent with the direct evidence that Deutsch did not in fact do so. The circumstantial evidence therefore has no probative value, and TRT cannot demonstrate a genuine issue of fact with regard to its misappropriation of trade secrets claim. See Wachovia Ins. Svcs. v. Fallon, 299 Ga. App. 440, 446-447 (3) (c) (682 SE2d 657) (2009) (former employee entitled to summary judgment on misappropriation of trade secrets claims where record contained no evidence showing that former employee used alleged trade secrets in his subsequent competing business); Stargate Software Intl. v. Rumph, 224 Ga. App. 873, 877 (2) (482 SE2d 498) (1997) (affirming grant of summary judgment because record contained no evidence that defendant “actually provided source code to [plaintiff’s client] or any other person”). Compare Hilb, supra, 284 Ga. App. at 597 (4) (finding issue of fact regarding misappropriation because former employee admitted using trade secret information after his resignation); DeGiorgio v. Megabyte Intl., 266 Ga. 539 (1) (468 SE2d 367) (1996) (finding issues of fact on misappropriation where employer received complaints from top customers, who could not be identified through phone books or commercial lists, about former employee’s activities).

Decided July 16, 2012.

Richard J. Dreger, for appellant.

Morris, Manning & Martin, Lawrence H. Kunin, Shannan F. Oliver, Reginald L. Carver, for appellees.

Consequently, we affirm the trial court’s partial grant of summary judgment to Deutsch on TRT’s misappropriation of trade secrets claim whether premised upon a violation of the Georgia Trade Secrets Act of 1990 or breach of contract.

Judgment affirmed in part and reversed in part.

McFadden, J., concurs. Boggs, J., concurs in judgment only.

       Deutsch also described Insenga’s reaction when asked about the ownership interest as “[y]elling and screaming, foaming, spittle coming out of his mouth, hitting things, flailing out of the room, driving off in his Porsche.”

       This was around the time that Deutsch first discussed starting his own business.

       The record shows that Deutsch raised this ground in support of his motion for summary judgment in the trial court and that the issue was argued during the hearing on Deutsch’s motion. Additionally, TRT addresses this alternative ground for summary judgment in its briefing to this court.

       TRT’s breach of contract claim premised upon disclosure of trade secrets fails because it cannot prove a breach. Nothing in this opinion should be construed to rule upon the validity of TRT’s remaining breach of contract claims unrelated to a claim for disclosure of trade secrets.


author: Boggs, Judge. Doyle, Presiding Judge,

text:
    A12A0671.
    CRONKITE v. THE STATE.
    (730 SE2d 694)
   Boggs, Judge.

We granted this application for interlocutory appeal to consider the trial court’s denial of defendant Weston D. Cronkite’s motion for a certificate of need for testimony under OCGA § 24-10-90 et seq., The Uniform Act to Secure the Attendance of Witnesses from Without the State (“the Act”). Cronkite sought to obtain, among other things, the “source code” or human-readable programming instructions for the Intoxilyzer 5000, by means of the testimony of a representative of the Kentucky manufacturer. The trial court concluded that such evidence was not “material” within the meaning of OCGA § 24-10-94 (a), and declined to issue a certificate. Because the trial court did not abuse its discretion in so concluding, we affirm.

After Cronkite was stopped for speeding on January 15, 2010, he submitted to a breath test using an Intoxilyzer 5000, which returned readings of 0.187 and 0.201. Cronkite was arrested and charged with speeding, driving under the influence per se, and driving under the influence to the extent he was a less-safe driver. The parties stipulated that Cronkite has a surgical implant in his upper jaw and a retainer on his lower teeth.

Before trial, Cronkite filed a motion pursuant to OCGA § 24-10-90 et seq. for “an [ojrder finding that the computer source code of the Intoxilyzer 5000 ... is material, relevant and necessary to preparing the defense in this criminal prosecution.” He also sought “other required assembly tools and compiler tools that are necessary for proper software evaluation,” and

copies of the manufacturer’s software assembly requirements and software specifications, any linked objects/files with comments preserved therein, and with any message digest (MD5) file signatures, information, documentation, and identification as to the software maker for the machine (if outsourced from [the manufacturer]), any compiled code, data tables and any associated (MD5) file signatures, as well as any systems “Test and Validation” plans studies or reports.

Finally, he sought to subpoena one or more out-of-state witnesses to produce the source code.

At the hearing on his motion, Cronkite presented Matthew Malhiot, a “forensic breath alcohol consultant,” as an expert witness. Malhiot testified regarding the operation of the Intoxilyzer 5000, the internal calibration of the machine, and the role of the software, including the source code, in controlling its internal calibration. Specifically, he testified that the software is designed to generate error messages in “numerous” circumstances that might produce an erroneous reading, including the presence of excess alcohol in the mouth. The witness described the manner in which the software determined the presence of mouth alcohol but testified that, without knowledge of the parameters established in the source code, he could not determine the range or “cutoff... for a particular error message.”

While Malhiot testified at some length regarding the potential for errors in the source code of the software used in the Intoxilyzer 5000, he had never examined the source code itself and could not determine that any error actually existed in the absence of the source code. He found no indication that an invalid sample was obtained in Cronkite’s case and could not determine whether mouth alcohol was present. He acknowledged that he could not testify “for a fact” that the presence of implants or partial dentures trapped excess alcohol and affected the test results in this case: “It’s not necessarily absolute. It can cause it.” He also acknowledged that the Intoxilyzer had “safeguards” which were designed to produce an error warning in the presence of excess alcohol in the mouth.

The trial court’s ruling from the bench, in its entirety, was as follows:

[Defense counsel]... just had a very... impressive witness. So I’m very impressed with the witness. I’m not going to agree with your argument, though. I think you had good evidence; you had, I guess, the strongest type of argument you can make given the facts of our case here. But I’m not going [to] find that he’s material, although, you know, like I indicated, he certainly was very credible.

(Emphasis supplied.) In its written order, the trial court expressly found that the evidence sought was not “material under the facts of this case” and made no findings with respect to the expert’s credibility. The trial court issued a certificate of immediate review, and this court granted Cronkite’s application for an interlocutory appeal.

OCGA § 24-10-94 (a) provides:

If a person in any state which by its laws has made provision for commanding persons within its borders to attend and testify in criminal prosecutions, or grand jury investigations commenced or about to commence, in this state is a material witness in a prosecution pending in a court of record in this state or in a grand jury investigation which has commenced or is about to commence, a judge of such court may issue a certificate under the seal of the court stating these facts and specifying the number of days the witness will be required. The certificate may include a recommendation that the witness be taken into immediate custody and delivered to an officer of this state to assure his attendance in this state. This certificate shall be presented to a judge of a court of record in the county in which the witness is found.

Our Supreme Court has defined the term “material witness” within the meaning of this statute as “a witness who can testify about matters having some logical connection with the consequential facts” of the case. (Citation and punctuation omitted.) Davenport v. State, 289 Ga. 399, 404 (711 SE2d 699) (2011). We review the trial court’s ruling under an abuse of discretion standard. See id. at 399.

Applying this standard, we conclude that the trial court did not abuse its discretion in declining to issue a certificate. The ruling correctly distinguished between the credibility of Malhiot and his testimony, and the materiality to this case of the evidence sought by Cronkite through the manufacturer’s representative. To hold otherwise would require a court to issue a certificate whenever a testifying witness was found credible.

Although an expert may testify to his opinion,

when the basis of his opinion is given and it appears that it is wholly speculative or conjectural, it must follow that his opinion is without foundation and has no probative value. Speculation and conjecture by an expert is still speculation and conjecture, and will not support a verdict.

(Citation, punctuation and emphasis omitted.) Layfield v. Dept. of Transp., 280 Ga. 848, 850 (1) (632 SE2d 135) (2006). Here, in sum, Malhiot’s testimony was that, although he could not testify to any facts supporting the existence of an error in Cronkite’s breath test results, and the Intoxilyzer had safeguards against the error in question, it was possible that the software contained some unknown flaw that could have affected the test results. The witness was not required, as the dissent asserts, to demonstrate an error in the source code. He was, however, required to testify to some fact indicating the possibility of an error in this case, and the trial court did not abuse its broad discretion in finding that he failed to do so.

The question presented here is not whether the source code itself, without which the Intoxilyzer will not function, has “some logical connection” with the consequential facts of this case, as proposed by the dissent. Were that the case, the source code would be relevant to every breath test resulting in a DUI prosecution in Georgia. Rather, the question is whether the trial court could have concluded, in the exercise of its discretion, that the testimony presented at the hearing failed to provide any evidence of an error in the source code that was material to this case. Some evidence of such an error is the consequential fact that would render testimony regarding the source code logically connected to the issue presented here.

As to this question, the witness was only able to speculate; and just as speculation will not support a verdict, it likewise cannot support a finding of materiality. Otherwise, anyone with evidence sought by a party could be rendered a “material witness” merely by speculation that examination of the evidence sought might reveal some material fact.

Here, Malhiot’s testimony, though found worthy of belief by the trial court, does not establish the materiality of the evidence sought sufficiently to show an abuse of discretion. The trial court was well within its broad discretion to conclude that Malhiot’s testimony with respect to the source code was speculative and to decline to issue a certificate on that basis.

Judgment affirmed.

Ellington, C. J., Andrews and Dillard, JJ., concur. Barnes, P. J., Phipps, P. J., and Doyle, P. J., dissent.

Doyle, Presiding Judge,

dissenting.

Because I believe the trial court abused its discretion in this case, I respectfully dissent.

As stated by the majority, Davenport v. State a similar case addressing an attempt to review the source code of the Intoxilyzer 5000, established the following definition of a “material witness”: one “who can testify about matters having some logical connection with the consequential facts, especially] if few others, if any, know about these matters.”

Here, the trial judge stated on the record that he was “impressed” with Malhiot’s testimony, that his testimony was “very credible,” and that Cronkite had presented “good evidence.” This testimony explained in detail how certain parameters included in the source code directly affect the Intoxilyzer’s ability to calibrate itself, to detect and to identify errors in the test, and to return accurate readings. And it is undisputed that few, if any, witnesses other than the one sought by Cronkite can testify as to the content of the source code. Therefore, based on the uncontroverted evidence deemed credible by the trial court at the hearing, the court abused its discretion by concluding that the source code had no logical connection with the consequential facts of this case.

Although the State and majority are correct that Cronkite presented no evidence of actual inaccuracies in the blood alcohol readings either due to calibration errors or Cronkite’s dental implants, requiring a criminal defendant to demonstrate errors in the source code without allowing him to examine it frustrates entirely his rights under the United States and Georgia Constitutions to compulsory process for obtaining witnesses in his defense. As noted by the concurrence in Davenport, the material witness standard alleviates due process concerns that can exist

when the State enacts a statutory scheme in which: (1) evidence usually determinative of the defendant’s guilt (e.g., blood alcohol content in a per se DUI prosecution) is tested and reported, not by forensic experts who testify and face cross-examination on the reliability of their methods and the accuracy of their results, but rather by a machine (e.g., the Intoxilyzer 5000) that takes in a specimen from the defendant and, through internal mechanisms and computer code, generates a test report; (2) the machine’s computer code is unavailable to the defendant through discovery or compulsory process because the State avoids possessing it in Georgia; (3) the machine’s test result is admissible at trial through a witness who can say that he was qualified to operate the machine and it operated as designed (see, e.g., OCGA § 40-6-392 (a)), but who has no knowledge about whether the machine was in fact designed to produce reliable and accurate results under the circumstances presented; and (4) the machine uses up the specimen, with nothing maintained for later confirmation or independent testing.

Further, if, as explained by Cronkite’s witness, the source code’s parameters were flawed, the blood alcohol readings returned by the Intoxilyzer would not be reliable despite the lack of evidence of error. Thus, the materiality of the source code is demonstrated by the fact that the sole evidence of Cronkite’s specific blood alcohol concentration depends on the accuracy and function of the source code’s parameters.

Moreover, the majority appears to overlook the limited nature of the inquiry at this stage of the proceedings. As explained by our Supreme Court in Davenport, the first level of inquiry when a motion is filed under OCGA § 24-10-94 (a) is whether the person is a material witness in a pending prosecution in a Georgia court of record and whether the other state has laws for commanding persons within its borders to attend and testify in criminal prosecutions in Georgia. What is not at issue at this stage is whether that witness is necessary to the pending prosecution. That question is reserved for the out-of-state court, if the Georgia court issues a certificate of materiality. The out-of-state court must make its own determinations as to whether “the witness is material and necessary to the Georgia criminal proceeding, [whether] compelling the witness to attend the Georgia proceeding and testify would . . . cause an undue hardship to the witness, and [whether] Georgia will give the witness protection from arrest and the service of civil or criminal process.” Indeed, in Davenport, the Supreme Court of Georgia held that it was improper for the Georgia court to weigh whether the witness was necessary; what matters here is only whether the witness is material:

the Georgia trial court evaluates the request under OCGA § 24-10-94 and must determine only whether the out-of-state witness is a “material witness” in the Georgia criminal prosecution and whether it should issue the certificate requesting the out-of-state court to order the out-of-state witness to attend the criminal proceeding in Georgia.

Thus, under Davenport, the case before us presents only the question of whether the out-of-state witness can testify about matters with some logical connection to the consequential facts of this case.

I am cognizant of the potential for abuse of this process. But this case is controlled by the statutory scheme established by the General Assembly and the precedent of the Supreme Court of Georgia interpreting that scheme. In light of the trial court’s explicit findings of credibility and the relatively low threshold for materiality established by the Supreme Court in Davenport, I conclude that the trial court abused its discretion by determining that the Intoxilyzer’s source code was not material to this case.

Decided July 16, 2012

Mcllhinney & Sessions, Daniel B. Sessions, for appellant.

Rosanna M. Szabo, Solicitor-General, Meredith L. Chafin, Assistant Solicitor-General, for appellee.

I am authorized to state that Presiding Judge Barnes and Presiding Judge Phipps join in this dissent.

        Yeary v. State, 289 Ga. 394, 398 (711 SE2d 694) (2011), allows the movant for such a certificate to identify a corporation as the alleged material witness without designating a particular representative, but in his motion Cronkite identified three individuals whose testimony he sought.

       While Malhiot did not testify to any training or education in reading or interpreting source code, the parties stipulated to his expertise solely “for the specific narrow issue as to the materiality certificate.”

       He also testified that Georgia has multiple versions of the source code in use.

       While the dissent correctly observes that admissibility is distinct from materiality, a finding of materiality under OCGA § 24-10-94 (a) must nevertheless be supported by admissible and probative evidence. The rules of evidence are the same in all courts unless otherwise provided by statute, OCGA § 24-1-3, and the determination that a witness is a “material witness” must itself be supported by admissible evidence. Moreover, the trial court is authorized to use its discretion in determining the weight to assign to a witness’ speculation on a finding of materiality.

       289 Ga. 399, 404 (711 SE2d 699) (2011).

       (Punctuation omitted.) Id. at 404. Davenport did not reach the question of whether the witness was a material witness.

       See id. at 399 (“The Sixth Amendment to the U. S. Constitution and Article I, Sec. I, Par. XTV of the Georgia Constitution guarantee a Georgia criminal defendant the right to compulsory process for obtaining witnesses in his defense.”).

        Davenport, 289 Ga. at 404-405 (Nahmias, J., concurring).

       The majority characterizes the expert’s testimony as wholly speculative and therefore without probative value. But this ignores the nonspeculative testimony as to how the source code controls the Intoxilyzer 5000 and how the software influences the outcome of the analysis. Such testimony must be seen to have some logical connection to the consequential facts. As more fully explained by Layfield v. Dept. ofTransp., 280 Ga. 848, 850 (1) (632 SE2d 135) (2006), cited by the majority, “the appropriate standard for assessing the admissibility of the opinion of [an] expert is not whether it is speculative or conjectural to some degree, but whether it is wholly so.” But even this argument is premature, because what is at stake in this case is materiality, not admissibility.

       See id. at 401. Whether the foreign state has laws for commanding persons to testify in Georgia is not at issue in this case.

       Id. at 401.

       (Emphasis supplied.) Id. at 402.