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Morin v. Innegrity, LLC

Court of Appeals of South Carolina

April 25, 2018

Brian Morin, Respondent,
Innegrity, LLC, Appellant. Appellate Case No. 2014-000734

          Heard September 27, 2017

          Appeal From Greenville County Edward W. Miller, Circuit Court Judge

          Sarah Day Hurley, of Turner Padget Graham & Laney, PA, of Greenville, for Appellant.

          Adam Crittenden Bach and Robert Hudson Smith, both of Eller Tonnsen Bach, of Greenville, for Respondent.

          HILL, J.

         A jury awarded Brian Morin damages on his breach of contract and Wage Payment Act claims against Innegrity, LLC. Pursuant to section 41-10-80(C) of the South Carolina Code (Supp. 2017), the trial court trebled the Wage Payment Act damages, and awarded Morin prejudgment interest, costs, and attorney's fees. Innegrity appeals, arguing the trial court erred by (1) denying its judgment notwithstanding the verdict (JNOV) motion as to Morin's breach of contract claim because it had proven the defense of impossibility, and some of the damages were speculative; (2) denying its JNOV motion on Morin's Wage Payment Act claim because the damages were unsupported by the evidence, and Innegrity established the defense of equitable estoppel; (3) trebling the Wage Payment Act award; (4) excluding Morin's deposition testimony from evidence; and (5) denying its motion for a new trial based on after-discovered evidence. We affirm all of the trial court's rulings except the trebling of part of Morin's Wage Payment Act damages.


         Working out of his home, Brian Morin developed a patented process for manufacturing a lightweight, high-strength synthetic fiber. In 2004, he founded Innegrity, LLC to bring the product to market. He financed Innegrity's early growth with his own funds and investments from family and friends. In 2008, Dr. Robert Schwartz invested three million dollars in Innegrity. In exchange, Morin transferred ownership of the intellectual property to the company and signed an Employment Agreement (Agreement) governing his rights and responsibilities as President and CEO. The Agreement included the company's promise to remove Morin as guarantor on any of Innegrity's loans if he were fired "without cause."

         Despite the influx of funds, the company suffered from the severe recession that began in 2008. As money woes persisted, Innegrity's Board instructed Morin to "stretch" the company's cash. To avoid layoffs, in April 2009 Morin and other key employees signed letters agreeing to reduce their salaries by certain percentages, which they would recoup as a bonus once the company raised another one million dollars. Upon reaching the goal in September 2010, Morin and the others signed a second agreement delaying the bonus payout until collection of another two million dollars.

         The lingering recession, chronic undercapitalization, and Board turnover increased pressure on Innegrity. To finance equipment Morin valued at 2.5 million dollars, in 2008, Innegrity borrowed 1.4 million dollars from BB&T in exchange for a first lien on equipment and a personal guarantee by Morin. Morin also guaranteed a loan to Innegrity from Appalachian Development Company (ADC) and engaged the investment firm McGladrey Capital to search for other funding. In addition, Morin was instrumental in securing substantial grants from the National Science Foundation (NSF) and South Carolina Launch.

         In 2009, an ex-Innegrity employee approached a Board member and accused Morin of falsifying time records related to the NSF grant. The Board members, including Morin, voted to hire outside counsel to investigate the allegation and later self-reported to the NSF, which suspended and ultimately terminated the grant.

         Around 2010, several companies became interested in purchasing Innegrity. After conducting due diligence, however, the companies withdrew. As Innegrity's cash began evaporating, its Board members began resigning, and those left were less than cohesive. At an early November 2010 Board meeting, a motion to terminate Morin for cause failed. A few days later, the Board terminated Morin without cause. At the time, he owned approximately 23 percent of the company. Innegrity defaulted on the BB&T and ADC loans, and never removed Morin as guarantor. BB&T later auctioned the equipment for $700, 000, and sued Morin on his guaranty.

         After Innegrity refused to pay his severance, back pay, and other monies, Morin brought this lawsuit. At the jury trial, he sought damages for Innegrity's alleged breach of contract and violation of the Wage Payment Act. Innegrity counterclaimed for breach of fiduciary duty, breach of duty of loyalty, and equitable estoppel. The jury awarded Morin $308, 456 for breach of contract (including $150, 000 for the BB&T loan) and $73, 230 on his Wage Payment Act claim. After a post-trial hearing, the trial court trebled the Wage Payment Act damages and awarded prejudgment interest, attorney's fees, and costs.


         Innegrity challenges the denial of its JNOV motion on Morin's claim for breach of the contract provision requiring Innegrity to remove Morin as guarantor on the BB&T and ADC loans, contending performance was impossible.

         We review a JNOV ruling in an action at law using the same yardstick as the trial court: presuming credibility of the evidence, we measure it in the light most favorable to Morin and gauge whether there is enough evidence as to each element of the claim to allow a rational jury to find in Morin's favor. If there is, the motion must be denied, for when reviewing a JNOV ruling, neither trial nor appellate courts may second-guess jury verdicts supported by reasonable evidence. S.C. Const. art. V, § 5; Welch v. Epstein, 342 S.C. 279, 300, 536 S.E.2d 408, 419 (2000).

         Innegrity asserts it conclusively established its affirmative defense of impossibility of performance at trial by showing the company was insolvent at the time of Morin's termination, and BB&T and ADC had rejected their request to remove Morin from his guarantees.

         The doctrine of impossibility excuses performance when "the thing to be done cannot by any means be accomplished, for if it is only improbable or out of the power of the obligor, it is not deemed in law impossible." Hawkins v. Greenwood Dev. Corp., 328 S.C. 585, 593, 493 S.E.2d 875, 879 (Ct. App. 1997) (citation omitted). Innegrity bore the burden of proving impossibility by the greater weight of the evidence. Id.

         Early cases were uniform that once a party contracted to perform an act, their later failure to perform the act promised breached the contract, unless it expressly excused performance or allocated the risk of nonperformance elsewhere. This rule is traced to Paradine v. Jane, 62 Eng. Rep. 897 (K.B. 1647), and its limited exceptions, as ...

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