Session July 23, 2014.
Appeal from the Chancery Court for Shelby County No. CH101858 Arnold B. Goldin, Chancellor.
Gordon Ernest Jackson, Cordova, Tennessee and Fred M. Ridolphi, Jr., Memphis, Tennessee, for the appellant, Caruthers & Associates, Inc.
Edward M. Bearman, Memphis, Tennessee, for the appellee, Christopher Douglas.
Robert L. Childers, Sp.J., delivered the opinion of the Court, in which David R. Farmer, J., and J. Steven Stafford, J., joined.
ROBERT L. CHILDERS, SPECIAL JUDGE.
Christopher Douglas ("Douglas") began working with Caruthers & Associates, Inc. ("Caruthers & Associates" or "Appellant") in 1992. Caruthers & Associates represented clients in tax appeals arising out of disputed property tax appraisals in Shelby County. When a tax appeal was successful, the client would typically receive a refund of overpaid property taxes. In return for representing the client in a tax appeal, the client agreed to pay Caruthers & Associates a percentage of the refunded overpayment. Thus, Caruthers & Associates' business model was contingent on successful appeals of property tax appraisals.
When Douglas was first hired, he entered into a written employment contract ("original employment contract") with Caruthers & Associates. In addition to including a provision regarding Douglas's base salary, the original employment contract provided other terms of Douglas's employment, including how his bonuses and commissions would be calculated. Under the original employment contract, Douglas received a 7.5% bonus for every client, residential or commercial, that he signed with Caruthers & Associates. In addition, he received 7.5% commission for every client he personally represented before the Shelby County Board of Equalization ("County Hearing Board"). Because Douglas both recruited and represented Caruthers & Associates' residential clients before the Hearing Board, his total fee amounted to 15% of the tax refund for those residential clients. The money used to pay Douglas his bonuses and commissions came from the client's tax refund.
Until the events that precipitated this lawsuit, the way in which Douglas obtained his bonuses for successful appeals was largely unchanged. As a matter of practice, if Douglas successfully negotiated a reduction of a property appraisal before the County Hearing Board, the Trustee remitted the client's resulting tax refund, and it was placed in Caruthers & Associates' escrow account. The refund was further divided between the Caruthers & Associates' fee and the client's refund. Caruthers & Associates' portion was then placed within its own business account. To obtain his compensation, Douglas would then submit a deposit sheet indicating how much he was owed for his bonuses and commissions. Caruthers & Associates' bookkeeper, Marcy Stone, would send the deposit sheets to Caruthers & Associates President and CEO, Jerry Caruthers, who would review and approve the deposit sheets. Douglas was then paid based on the identification of his clients according to the deposit sheets he had remitted.
Until July 2009, Douglas worked under the original employment contract formed in 1992.  On July 1, 2009, Douglas asked Jerry Caruthers for a copy of the original employment contract and also for a raise in his salary. Jerry Caruthers agreed to Douglas's request for a raise, and he had a new Employment Agreement ("Employment Agreement") prepared, which both parties signed. The terms of the Employment Agreement regarding compensation provided Douglas with a monthly raise in his salary, but maintained the same fees for soliciting and representing clients. The Employment Agreement provides, in relevant part:
[B]onuses or commissions are intended to be incentive for future performances, as opposed to compensation for past work, and accordingly, in the event the employment herein agreed to is terminated for any reason, Employee does hereby waive any right to receive such bonuses or commissions which have not been paid as of the time of such termination.
Any prior dated agreements for employment or compensation between Employee and Employer, whether written or oral, are hereby terminated and cancelled and any claims for compensation, damages, losses, or otherwise from any reason or cause whatsoever which may arise from any employment by Employee and Employer prior to the date of this Agreement are hereby waived and forfeited by both Employee and Employer.
It is agreed and understood that this Agreement is an agreement at will with no specific term and Employer or Employee may, regardless of the stated manner or date of payment of compensation, terminate this agreement at any time for any reason without cause or notice. In the event this agreement is terminated at any time for any reason by Employer or Employee, all commissions and bonuses from fees as yet not received by Employer and to which Employee may have been entitled to receive, shall be forfeited by Employee . . .
Pursuant to the parties' new Employment Contract, Douglas continued to submit his deposit sheets in the same manner that the parties had been operating under prior to the execution of the new contract. Jerry Caruthers generally approved the deposit sheets and, Caruthers & Associates paid Douglas as it had under the original employment contract. However, on July 29, 2010, Jerry Caruthers died. Jerry Caruthers' son, Taylor Caruthers,  then assumed his father's position as CEO and President.
Upon review of Caruthers & Associates' Employment Agreement with Douglas, Taylor Caruthers, as the new CEO and President, allegedly became concerned that Douglas was not a licensed appraiser or a registered agent with the State Board. On August 16, 2010, Taylor Caruthers delivered a memorandum ("2010 Memorandum") to Douglas. Since Douglas's job involved the presentation of property values, Taylor Caruthers, in the 2010 Memorandum informed Douglas that he needed to become licensed as an appraiser of property or a registered agent. Taylor Caruthers' 2010 Memorandum to Douglas provided, in relevant part:
This is in regard to your Employment Agreement dated July 1, 2009. A few items you need to be aware of regarding this agreement going forward as follows:
Regarding your employment as appearing before the Shelby County Board of Equalization (Hearing Officer) or any other Board where the appraisal or valuation of property is concerned is hereby terminated. You are neither a Registered Agent or a Licensed Real Estate Appraiser as required by law under the Tennessee Code 62-39-103 and 67-5-1514. Therefore, before you will be allowed to appear before any Board of Equalization you must first obtain an Appraisal License or become a Registered Agent. [Caruthers & Associates] will not accept any responsibility for not following this law going forward.
Furthermore, your employee agreement is effective July 1, 2009. Please do not consider past clients as part of any Bonus income. I have enclosed a copy of all new Client's [sic] you signed up for the 2009 reappraisal. Please only Bill on the attached clients. You recently were paid on past Client's [sic] which was a mistake on my part and am debating on how to handle such and will make a decision on this matter soon.
Taylor Caruthers placed this memorandum in Douglas's office. Douglas found the memorandum the following morning and asked Ms. Stone if she knew anything about the memorandum. She replied she was unaware of it. Douglas then proceeded to clean out his office, including several boxes of Caruthers & Associates' client files, and return his office keys to Ms. Stone. Douglas had no communication, other than a letter sent by his attorney, with Taylor Caruthers regarding the 2010 Memorandum until he filed this suit on October 12, 2010. Eventually, at trial, Taylor Caruthers conceded that the law does not require Douglas to be licensed or registered before representing clients before the County Hearing Board.
Douglas filed a complaint for damages against Caruthers & Associates on October 12, 2010, alleging breach of contract and tortious interference with business relations. In addition to his claim for compensatory damages, Douglas also requested punitive damages and a declaratory judgment. Douglas asserts that, given the timing of Douglas's termination, Caruthers & Associates has collected fees stemming from the services Douglas provided to certain clients. In fact, within thirty (30) days after Taylor Caruthers sent the 2010 Memorandum to Douglas, Caruthers & Associates had allegedly already received approximately $270, 000.00 in fees, a portion of which Douglas claims he is entitled to receive as commissions on past work.
The trial court, sitting without a jury, initially heard proof on the issue of liability on January 17 and 18, 2012. Several witnesses testified before the trial court, including Douglas himself; Stephen Branim, an appraiser at the Shelby County Assessor of Property office; Caroline Caruthers, the wife and former owner of Caruthers & Associates; Marcy Stone, the bookkeeper at Caruthers & Associates; and Taylor Caruthers, CEO and President of Caruthers & Associates.
At the end of Douglas's proof, Caruthers & Associates moved for a directed verdict. Caruthers & Associates argued that Douglas had not been terminated, but instead he had quit, and as such, was not entitled to any further compensation pursuant to the terms of the Employment Agreement. At this time, the trial court dismissed two of Douglas's four claims, including dismissing the claims for tortious interference and punitive damages.
The trial court entered an Order of Judgment on February 10, 2012 ("February Order"), which specifically incorporated its oral ruling made after trial. The trial court orally found that Douglas had been constructively terminated from his employment at Caruthers & Associates and that he was entitled to damages due to Caruthers & Associates' breach of the compensation terms of the Employment Agreement. Additionally, the trial court made oral findings regarding the waiver of certain provisions in the Employment Agreement that Caruthers & Associates argued precluded Douglas's recovery, as well as indicated that Caruthers and Associates violated the implied duty of good faith and fair dealing. Regarding the calculation of Douglas's damages, the trial court's written order provides:
Specifically, the Court finds that Douglas is entitled to 15% commissions on all of his clients that he presented appeals before the County Board of Equalization and procured a reduction for the period of July 1, 2009, the date of the new contract, and August 16, 2010, the date of the  Memorandum from Taylor Caruthers to the day he left the employ of Caruthers and Associates regardless of when the refunds were received by Caruthers and Associates. In addition Douglas is entitled to receive 7.5% commissions on his clients during the same period of time on appeals presented to the County Board of Equalization by others from Caruthers which resulted in a reduction regardless of when the refund is received by Caruthers and Associates. The Court finds that the  Memorandum constitutes a statement that Caruthers and Associates is no longer willing ...