Cummings Inc. v. Dorgan

320 S.W.3d 316, 2009 WL 3046979
CourtCourt of Appeals of Tennessee
DecidedDecember 9, 2009
DocketM2008-00593-COA-R3-CV
StatusPublished
Cited by27 cases

This text of 320 S.W.3d 316 (Cummings Inc. v. Dorgan) is published on Counsel Stack Legal Research, covering Court of Appeals of Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cummings Inc. v. Dorgan, 320 S.W.3d 316, 2009 WL 3046979 (Tenn. Ct. App. 2009).

Opinion

OPINION

HOLLY M. KIRBY, J.,

delivered the opinion of the Court,

in which ALAN E. HIGHERS, P.J, W.S., and DAVID R. FARMER, J., joined.

This appeal involves an employment agreement and a non-compete covenant. The defendant sates representative was employed as a salesperson by the employer sign company. The parties executed an agreement setting out the structure of the employee’s compensation, to be effective for three years. Prior to the expiration of the agreement, the plaintiff employer asked the employee to sign a new contract, changing his pay from straight commissions to salary plus commissions, as well as a separate two-year non-compete contract. The employee initially declined to sign the new contracts, but ultimately did so because he was told that he would be terminated if he refused. Over a year later, the employee quit to work for one of the plaintiffs competitors, and began soliciting his previous employer’s largest account. The employer filed this lawsuit to enforce the non-compete contract. The employee asserted that the non-compete contract was unenforceable and filed a counterclaim, alleging breach of contract. After a bench trial, the trial court enforced the non-compete contract, but held that the new compensation contract, executed on threat of termination, was void because it was signed under duress. The trial court awarded the employee damages. The employer now appeals, arguing that the new compensation contract was not signed under duress. The employee argues on appeal that the non-compete contract is unenforceable, because it was not supported by consideration and was also signed under duress. We find that the defendant employee was an employee-at-will of the plaintiff company. On this basis, we reverse the trial court’s finding that the new compensation contract was signed under duress, because threatening an at-will employee with termination does not constitute duress under the circumstances. We affirm the trial court’s holding that the non-compete contract was enforceable.

Factual BACKGROUND

Plaintiff/Appellant Cummings Incorporated (“Cummings”), 1 based in Nashville, *320 Tennessee, designs, engineers, manufactures, sells, and installs signage products for businesses in retail, fast food, and hospitality industries throughout the United States. 2 Cummings also remodels existing signage through the Cummings Remodel Group (“CRG”); these remodel projects are referred to by the parties as either “CRGs” or “CSRs.” Defendant/Appellee Terry J. Dorgan, Jr. (“Dorgan”), was employed by Cummings as a salesperson from January 1987 through January 2006. 3 Dorgan was a “remote” salesperson for Cummings; he worked from his home in Columbus, Ohio.

On October 9, 1998, Dorgan executed a document related to his terms of employment with Cummings; the document was entitled “National Sales Group Commission Sales and Compensation Program January 1, 1999 thru December 31, 1999.” It is referred to herein as the “Original Contract.” 4 A threshold issue in this case involves whether this Original Contract is an employment contract or simply a compensation agreement. Therefore, we will outline the provisions pertinent to this issue.

The first paragraph of the Original Contract states: “This program is not an Agreement to employ [Dorgan] for any specified length of time.” After outlining in great detail Dorgan’s commission structure, paragraph seven of the Original Contract provides that Cummings “may terminate this Agreement at any time, and without advance notice, for cause.” Thus, while the first paragraph of the Original Contract states that it is not an agreement to employ Dorgan for any specified length of time, the seventh paragraph provides only for termination of “this Agreement” for cause. The Original Contract states that Dorgan was permitted to terminate it upon thirty days written notice to Cummings. If Dorgan terminated “this Agreement,” he would be bound by a non-compete clause in which he agreed “to not solicit or compete with the company on any accounts prospected or sold for the company as documented in the call reports ... for one year from the date of termination.”

Dorgan’s compensation as set forth in the Original Contract was based totally on commissions: 2% of sales on new business (less than two years old), 1% on old business (between two and five years old), and .5% on institutional business (older than five years). Paragraph four of the original contract provided for adjustments in commission percentages based on sales that generated an unusually high or low profit margin. If a particular sale had an extremely low profit margin, it was considered a “second tier” account. On such accounts, Dorgan earned only half of the normal commission rate:

Sales commission on accounts identified during the bidding process, as Second Tier (extremely low margin) business will be paid at one-half the normal commission rate. Second Tier accounts are *321 usually identified by high volume, low service requirements; business on which the company is not normally competitive, but which we aggressively quote to help reduce overall plant burden.

The Original Contract does not define the term “extremely low margin.” If a particular sale had a very high profit margin (27.5% or higher), the Original Contract provided for additional commission. Paragraph six of the Original Contract stated: “It is understood that the company retains the option to realign territories and/or customers during the calendar year.”

On approximately March 14, 2003, the parties executed a document that revised some of the commission percentages in the Original Contract, but otherwise incorporated all of its remaining terms. This second document, referred to herein as the “Revised Contract,” was to remain in effect from March 1, 2003, through December 31, 2005.

Prior to the execution of the Revised Contract, Dorgan’s immediate supervisor was Cummings’ Executive Vice President and Chief Marketing Officer, James Murray (“Murray”). After the execution of the Revised Contract, Dorgan was told to report to the general manager of Cummings’ western division, Doug Malo (“Malo”). Malo lived in southern California and reported directly to Dorgan’s previous immediate supervisor, Murray.

In the earlier years of his employment, Dorgan’s primary accounts were Kentucky Fried Chicken (“KFC”) franchisees, operated by Tricon Global Restaurants, Inc. (“Tricon”). Tricon also managed Pizza Hut and Taco Bell. In May 2002, Tricon changed its name to YUM! Brands, Inc. (“YUM”). YUM began to operate other businesses, including Long John Silver’s restaurants and A&W Root Beer. YUM was one of Cummings’ largest clients, and Dorgan was Cummings’ representative assigned to YUM.

In October 2003, for the first time, YUM conducted a “reverse auction” for signage vendors to compete for YUM’s signage business. In the reverse auction, conducted over the internet, signage vendors engaged in essentially a bidding war to become an approved vendor for YUM.

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Cite This Page — Counsel Stack

Bluebook (online)
320 S.W.3d 316, 2009 WL 3046979, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cummings-inc-v-dorgan-tennctapp-2009.