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Allegro, Inc. v. Scully

Supreme Court of South Carolina

August 24, 2016

Allegro, Inc., Respondent,
v.
Emmett J. Scully, Synergetic, Inc., George C. Corbin and Yvonne Yarborough, Petitioners. Appellate Case No. 2014-002055

          Heard November 18, 2015

         ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

         Appeal from Richland County L. Casey Manning, Circuit Court Judge

          Amy L. Gaffney, of Gaffney Lewis & Edwards, LLC, and C. Mitchell Brown, William C. Wood, Jr., and Brian P. Crotty, all of Nelson Mullins Riley & Scarborough, LLP, all of Columbia, for Petitioners.

          Richard J. Morgan and Robert L. Widener, both of McNair Law Firm, PA, of Columbia, for Respondent.

          HEARN JUSTICE

         This protracted litigation emanates from Emmitt Scully's departure from Allegro, Inc., a professional employer organization (PEO)[1], in order to form a competing PEO-Synergetic, Inc.-along with former Allegro employees, including Yvonne Yarborough. Allegro brought this suit against Scully, Yarborough, Synergetic, and George Corbin-a former client of Allegro who also performed some accounting services for the company (collectively Petitioners). The jury returned a verdict in favor of Allegro on all claims and awarded it $1.76 million in actual damages and $250, 000 in punitive damages. Petitioners moved for, inter alia, JNOV on all causes of action, which the trial court denied. The court of appeals reversed and remanded for a new trial, and we therefore address only whether the claims for civil conspiracy, breach of contract, and breach of contract accompanied by a fraudulent act should be included in the remand. We find those causes of action should never have been submitted to the jury and therefore hold the court of appeals erred in affirming the trial court's denial of JNOV as to those claims.

         FACTUAL/PROCEDURAL BACKGROUND

         After working within the industry for several years, Mary Etta McCarthy decided to develop a PEO, and in the summer of 1997 she began looking for a partner with more human resources experience to join her in this endeavor. She eventually entered into a partnership agreement with Scully and formed Allegro. Pursuant to the agreement, Scully would ultimately have forty-nine shares of the partnership and McCarthy would have fifty-one. Scully acted as Allegro's president, supervising the day-to-day operations, working with employees, and keeping up the client relationships. During that time, Scully became acquainted with Corbin, who Allegro retained for outside accounting and CPA services. Corbin prepared the books and performed Allegro's annual audits for two or three years.

         After some time, the relationship soured and Scully began considering different options to sever his ties to McCarthy, all of which he discussed with Corbin. To aid Scully in his decision making, Corbin drafted a letter identifying Scully's different options-buying out McCarthy, McCarthy buying his shares, or starting a new company. In the spring of 2003, Scully informed McCarthy he wanted to run Allegro on his own and therefore would like to buy out her shares.

         After almost a year of being unable to reach a resolution on the price of the shares, Scully tendered his resignation. Although McCarthy initially agreed to accept Scully's offer to purchase her shares, she quickly changed her mind the following week when Scully was away on business. When Scully returned from his trip, McCarthy met him at the office with a letter accepting his resignation and immediately requested the keys to the company car and the return of any company property. McCarthy had the police waiting in an adjacent room in the event troubled occurred and ordered a cab to take Scully home.

         Over the course of the following week, Scully began visiting Allegro's customers. He ultimately established his new company, Synergetic, and two employees from Allegro, Yarborough and Lisa Milliken, joined him.

         Allegro filed this suit on April 2004 against Synergetic, Scully, Corbin, and Yarborough, alleging thirteen causes of action. The same day, Allegro filed a motion for a temporary injunction to enjoin Synergetic, Scully, and Yarborough from soliciting any of its clients. The injunction was granted in a thorough ten-page order. The case proceeded to trial.

         At the close of Allegro's case as well as at the close of all the evidence, both parties moved for directed verdict. The trial court denied the motions and submitted the case to the jury. The verdict form sent to the jury listed eleven causes of action and provided the jury a blank space to include the damages next to each action.[2]

         The jury returned a verdict for Allegro on all causes of action, awarding $160, 000 in actual damages on each claim. It also awarded $75, 000 in punitive damages on the claim for breach of loyalty against Yarborough, and $175, 000 in punitive damages for the civil conspiracy claim.

         Thereafter, Petitioners moved for election of remedies, judgment notwithstanding the verdict (JNOV) on all causes of action, new trial, and new trial nisi remittitur. The trial court denied all the motions in an order dated July 9, 2008, basing much of its conclusions on preservation grounds. Specifically, the trial court found Petitioners' arguments for JNOV were not preserved as to the claims for breach of duty of loyalty against Scully and Yarborough, breach of duty of good faith against Scully, breach of fiduciary duty against Scully, and conflict of interest by Scully because those issues had not been challenged at the directed verdict stage.

         Addressing the remaining claims, the trial court held, inter alia, the limited ground upon which the breach of contract claim had been challenged was whether there was any evidence of the existence of a contract, not whether Allegro had failed to prove the terms of the contract; accordingly, it addressed only the existence and concluded there was sufficient evidence to overcome a JNOV motion. On the breach of contract accompanied by a fraudulent act claim, the trial court also found Petitioners had never alleged there was no evidence of a fraudulent act and were therefore precluded from doing so at the JNOV stage. As to the civil conspiracy claim, the trial court found Petitioners had failed to argue a lack of evidence of special damages in their directed verdict motion and therefore could not argue that as grounds for JNOV.

         The trial court also denied Petitioners' motions for a new trial, which were premised in part on alleged evidentiary issues, holding it was not error to admit evidence of the temporary injunction to the jury. With regard to Petitioners' assertions that the verdict was inconsistent or that Allegro was required to elect a remedy, it concluded there was no double recovery and Petitioners' failure to ...


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