Court Opinion

ID: 4506741
Source: CourtListenerOpinion
Date Created: 2020-02-12 08:05:40.669291+00
Date Added: 2024-06-11T08:50:31.252308
License: Public Domain

Order                                                                     Michigan Supreme Court
                                                                                Lansing, Michigan

  February 7, 2020                                                             Bridget M. McCormack,
                                                                                              Chief Justice

                                                                                     David F. Viviano,
                                                                                     Chief Justice Pro Tem
  158632
                                                                                   Stephen J. Markman
                                                                                        Brian K. Zahra
                                                                                  Richard H. Bernstein
  RESOURCE POINT, LLC,                                                            Elizabeth T. Clement
           Plaintiff-Appellee,                                                    Megan K. Cavanagh,
                                                                                                   Justices

  v                                                     SC: 158632
                                                        COA: 338338
                                                        Oakland CC: 2015-150580-CB
  ADDOLUX, LLC,
           Defendant,
  and
  MASOUD ABBASI,
          Defendant-Appellant.

  _________________________________________/

        On order of the Court, the application for leave to appeal the September 20, 2018
  judgment of the Court of Appeals is considered, and it is DENIED, because we are not
  persuaded that the questions presented should be reviewed by this Court.

           ZAHRA, J. (dissenting).

         I disagree with the Court’s decision to deny defendant’s application for leave.
  Because the Court of Appeals failed to defer to the trial court’s assessment of witness
  credibility, 1 I would reverse in part the judgment of the Court of Appeals as to damages
  and remand this case to the Oakland Circuit Court for reinstatement of its damages
  award. 2

          Defendant contracted with plaintiff to provide Information Technology work for
  Gordon Food Service (GFS) from October 2012 through February 8, 2014 (referred to as
  the “first engagement”). The contract included a noncompete agreement that expired on
  August 8, 2015. Defendant violated the noncompete agreement by soliciting work from
  GFS. Specifically, in June 2015, plaintiff contacted GFS so as to arrange additional work
  for defendant, but it learned that defendant had already directly solicited and obtained
  employment at GFS (referred to as the “second engagement”).

  1
      See MCR 2.613(C) and In re Miller, 433 Mich 331, 337 (1989).
  2
   I agree with and would leave intact the portion of the Court of Appeals’ opinion that
  concludes the trial court erred by denying plaintiff’s request for attorney fees as
  contemplated by the noncompete agreement as part of the damages award.
                                                                                          2

      Plaintiff sued and, following a bench trial, the trial court found that defendant had
breached the noncompete agreement and was liable to plaintiff for breach of contract.
The more difficult issue was determining damages. The Court of Appeals provided this
summary:

          During the first GFS engagement, GFS paid [plaintiff] $160 per hour of
          services; [plaintiff] in turn paid [defendant] $115 an hour, leaving
          [plaintiff] with a profit of $45 per hour. After six months, GFS increased
          the pay rate to $180 per hour. [Plaintiff] paid [defendant] $130 an hour, for
          a profit of $50 per hour. Under both pay rates, [plaintiff] retained 28% of
          the GFS payment. During the second GFS engagement, [defendant]
          worked for a different GFS department. Under this contract, GFS paid
          [defendant] $150 per hour. And from June 2015 through the time of trial,
          [defendant] had worked a total of 2,896 hours.[3]

      The Court of Appeals also summarized the disagreement about damages related to
defendant’s work during the second GFS engagement:

          [Plaintiff] provided evidence that it bore some overhead from negotiating
          the first contract between GFS and [defendant], but asserted that with the
          initial work under its belt, these costs would not be duplicated in a second
          placement between GFS and [defendant] . . . . Accordingly, [plaintiff]
          asserted, its share of the payments during [defendant]’s second GFS
          engagement would have been “pure profit.” Overall, [plaintiff] sought
          $180,800 in damages.[4]

        The trial court “took judicial notice that [plaintiff]’s overall profit margin was
12.5% and determined to award [plaintiff] only 12.5% of the payments [plaintiff] would
have retained during [defendant]’s second GFS engagement, a total of $22,600.” 5 The
trial court ruled that “this [c]ourt’s measure of damages is the . . . profit margin that
[plaintiff] would have made on [defendant]’s job starting on June 8th of . . . 2015 and
continuing through the four months, through May 25th of 2017 . . . .”

      The Court of Appeals vacated the $22,600 damages portion of the trial court
judgment and instead remanded the case for entry of a judgment awarding plaintiff
$147,588 in damages for lost profits. This is how the panel arrived at that figure:

3
 Resource Point LLC v Addolux LLC, unpublished per curiam opinion of the Court of
Appeals, issued September 20, 2018 (Docket No. 338338), p 2.
4
    Id.
5
    Id.
                                                                                    3

       As noted, the parties’ noncompete agreement provided that
[defendant] was required “to indemnify and hold harmless” [plaintiff] “for
any and all loss, costs, and other liability incurred or threatened” as a result
of [defendant]’s breach. To calculate [plaintiff]’s loss, the circuit court was
required to determine the value of [defendant]’s contract for the second
GFS engagement. [Plaintiff] presented evidence that at the time of trial,
[defendant] had worked 2,896 hours for GFS, for an average of 38.61 hours
per week. Other uncontroverted evidence established that [defendant]’s
work would continue for at least another four months, or 16 weeks, under
the second GFS engagement. Multiplying 38.61 hours per week by 16
weeks amounts to an additional 617.76 hours. Rounding that number and
adding it to the hours [defendant] had already worked amounts to a total of
3,514 hours. The second GFS engagement was therefore worth 3,514 hours
of work.

        The value of the hours then becomes critical to determining
[plaintiff]’s lost profits. [Plaintiff] presented evidence that GFS paid $150
per hour under the second GFS engagement. Multiplying the total number
of hours worked (3,514) by this hourly rate amounts to a total of
$527,100—i.e., the total value of the second GFS engagement was
$527,100.

       [Plaintiff] would not have been entitled to the entire $527,100, as it
would have been required to turn a portion of this amount over to
[defendant] as his compensation. Accordingly, the trial court was next
required to calculate how much of the total contract value would have
flowed into [plaintiff]’s pockets. To arrive at this figure, it is appropriate to
consider past dealings between the parties involved. As noted, the
undisputed evidence shows that [plaintiff] retained 28% of GFS’s payment
during [defendant]’s first GFS engagement. The evidence of these previous
dealings allowed [plaintiff] to prove its damages with reasonable certainty.
Health Call of Detroit [v Atrium Home & Health Care Servs, Inc, 268 Mich
App 83, 96 (2005)]. The proper measure of damages was 28% of the value
                                                                                                                4

         of the contract for the second GFS engagement; 28% of $527,100 amounts
         to a total of $147,588 in lost profits.[6]

        In my view, the discrepancy between the trial court and the Court of Appeals is
attributable to determination of overhead. Plaintiff maintained there would was no
overhead and that the referral fee for the second GFS engagement would have been 100%
profit. The trial court understandably found this contention dubious and expressly
rejected the testimony that supported this contention. Specifically, the court found that
Rita Mehta, plaintiff’s vice president, was not credible. It is within the purview of the
trier of fact to determine credibility, and great deference is given to the fact-finder on that
issue. Having found Mehta not credible, the trial court calculated damages by applying
plaintiff’s 2015 profit margin to the gross income it claimed it would have received from
the second GFS engagement. The use of the 12.5% profit margin properly accounted for
the net profit loss. In my view, the trial court’s methodology was proper and reasonable.
The Court of Appeals improperly failed to defer to the trial court’s assessment of witness
credibility. I would reverse in part the judgment of the Court of Appeals as to damages
and remand this case to the Oakland Circuit Court for reinstatement of its damages
award.

         MARKMAN, J., joins the statement of ZAHRA, J.

6
    Resource Point LLC, unpub op at 4.

                          I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
                    foregoing is a true and complete copy of the order entered at the direction of the Court.
                          February 7, 2020
         s0204
                                                                              Clerk