Total Quality Inc v. Terry L Fewless

Rule of Law:

A nonsolicitation clause prohibiting "calling on, soliciting, or servicing" a former employer's customer to induce them to cease doing business or interfere with their relationship can be breached by affirmatively responding to an unsolicited Request for Proposal (RFP) from that customer, even if the customer initiated contact, especially when the response aims to acquire business previously serviced by the former employer. Such a breach can also form the basis for a tortious interference claim if the defendant knew its actions were substantially certain to cause interference.

Facts:

• TQI, a transportation logistics company, was founded by Terry Fewless in 1992.
• In 2008, Terry Fewless, Nathan Fewless, and Kris Fewless sold their interest in TQI but Terry and Nathan purchased a minority share and signed employment agreements with TQI that included a nonsolicitation clause.
• The nonsolicitation clause forbade Terry and Nathan from inducing TQI employees to leave, hiring TQI employees within 12 months, or soliciting/servicing TQI customers to induce them to cease doing business or interfere with TQI's relationship; it remained in effect during employment and for two years thereafter.
• The initial terms of the employment agreements ran from March 7, 2008, until March 7, 2013, and automatically renewed for one-year terms.
• In 2013, Forward Air, Inc., purchased TQI for $66 million; Terry and Nathan continued employment under renewal terms.
• On January 31, 2014, Terry gave notice not to renew his employment agreement, and on February 3, 2014, TQI gave notice not to renew Terry and Nathan's agreements; the agreements expired on March 8, 2014, after which they continued as at-will employees.
• Terry resigned from TQI on October 31, 2014, and Nathan resigned on April 10, 2015.
• On February 9, 2015, QLSL was formed by Terry and Kris Fewless; in June 2015, an operating agreement reflected Kris and Nathan each possessed a 50% ownership interest in QLSL, and QLSL began involving personnel, including Amy Hebert, Joel Dykens, and Steve Milam, all previously affiliated with TQI.
• QLSL began servicing customers who had previously done business with TQI, including Pfizer, Perrigo, and Actavis; Pfizer emailed an RFP to Terry in August 2015, which Terry forwarded to Nathan and Ms. Hebert, and QLSL subsequently submitted a bid for work with Pfizer, including lanes previously serviced by TQI.

Procedural Posture:

• TQI filed an action, eventually an amended complaint, against Terry L. Fewless, Nathan Fewless, and Quality Life Science Logistics, LLC (QLSL) in Mecosta Circuit Court (trial court), alleging breach of contract (against Terry and Nathan for violating nonsolicitation clause) and tortious interference with business relations (against all defendants).
• Defendants moved for summary disposition on TQI's claims.
• The Mecosta Circuit Court denied defendants' motion for summary disposition, finding genuine issues of material fact regarding breach of contract and tortious interference claims.
• Defendants filed an interlocutory application for leave to appeal the denial of summary disposition with the Michigan Court of Appeals (intermediate appellate court).
• The Michigan Court of Appeals denied defendants' interlocutory application for leave to appeal.
• The case proceeded to a bench trial in Mecosta Circuit Court on TQI's claims that Terry and Nathan improperly solicited Pfizer business and tortiously interfered with TQI's existing business relationship with Pfizer.
• Following the presentation of proofs, the trial court issued a detailed ruling from the bench finding that Terry and Nathan violated the nonsolicitation provisions and that QLSL tortiously interfered with TQI's business relationship with Pfizer, determining damages.
• In a written opinion dated September 25, 2018, and a final judgment entered October 30, 2018, the trial court awarded damages of $550,663 against all defendants, jointly and severally.
• Defendants Terry L. Fewless, Nathan Fewless, and QLSL appealed as of right the trial court’s October 30, 2018 judgment and the earlier denial of their motion for summary disposition to the Michigan Court of Appeals.