Date: 10-04-2012
Case Style: Associates Resources, Inc. v. Becky D. Miller
Case Number: CJ-2009-3760
Judge: Linda G. Morrissey
Court: District Court, Tulsa County, Oklahoma
Plaintiff's Attorney: Kelly F. Monaghan and D. Gramham Parker
Defendant's Attorney: Timothy L. Rogers and Robert B. Sartin
Description: Associates Resources, Inc. sued Becky D. Miller and Petrosource, LLC on breach of fiduciary duty and loyalty theories.
Plaintiff Associated Resources, Inc. (“ART”) seeks damages against ART’s former employees, Charles Hancock (“Hancock”) and Becky Miller (“Miller”) and their limited liability company, Petrosource, LLC (“Petrosource”). for breach of fiduciary duty and loyalty, interference with contractual and business relationships, intentional interference with prospective economic advantage, and breach of employment policies.
ARI is in the business of providing accounting and land management services to companies in the oil and gas industry. Prior to submitting their resignations, Hancock was employed as the Chief Financial Officer of ARI and Miller was employed as the Controller o ARI. Hancock and Miller jointly formed Petrosource prior to tendering their resignations. In January 2002, Miller executed an Employee Acknowledgment form toARI's Employee Policies and Procedures. Under such policies and procedures, specifically the section Covenant Not to Compete, Miller agreed not to solicit ARI clients for a period of one year following termination of her employment atARI.
GeoSouthern Energy Corporation, Keystone Petroleum, LLC, Mid-Continent Energy Operating Company and Staghom Energy, LLC (collectively “ART Established Customers”) had previously entered into Consulting Agreements with ARI under which ART was to provide accounting and/or land management services to each client. Promptly following the tender of Miller and Hancock’s resignations, the API Established Customers submitted notices of termination to ART. Geosouthem Energy Corporation and Keystone Petroleum, LLC entered into Consulting Agreements with Petrosource, LLC. However, Geosouthem Energy Corporation cancelled its Consulting Agreement with Petrosource, LLC prior to its commencement date.
3. Plaintiffs Contentions
ART is an Oklahoma corporation providing accounting and land services to companies in the oil and gas industry. Jeff Myers (“Myers”) is the owner and President of ARI. In 2000, Hancock was promoted to Chief Financial Officer and remained in that position until he tendered his resignation on May 14, 2009, to be effective May 28, 2009. Miller was hired by API in 2002, and in 2006 was promoted to the position of Controller. She remained in that position until tendering her resignation on May 14, 2009, to be effective May 28, 2009, Both Hancock and Miller occupied senior positions at ART and Myers had placed substantial trust and confidence in the high level of authority they held and in the performance of their duties in the best interests of ARI.
Part of the services ART provides includes accounting relating services for oil and gas companies. Both Hancock and Miller worked in this division. Hancock’s duties included supervising the performance of the work, client management, solicitation of business on behalf of ART, and protecting the assets of ART. ARI would customarily enter into written contractual agreements with its clients setting forth the terms and obligations of the parties. Typically the consulting agreements were for a period of one year, renewal annually.
In January 2009, Hancock approached Myers requesting he be appointed President or Chief Operating Officer, as he wanted to be in charge of running AM. During this meeting, he stated to Myers he had been approached by others to form his own company, performing services similar to ART. He further stated to Myers that he knew many of the API customers would go with him if he started a competing company.
In the Spring of 2009, Hancock and Miller began the formation of a competing company. Petrosource was organized in early April 2009, with Hancock and Miller each owning fifty percent. A written Business Plan was prepared for Petrosource by Hancock and Miller. This Business Plan was used to obtain financing Petrosource needed to begin operations. Included within the Business Plan was a list of companies, all established customers of ART, Petrosource intended to solicit and on which its initial projections were based. Hancock’s and Miller’s Business Plan consisted of the single strategy of soliciting ARI’s most profitable established customers and ART’s most productive employees. In preparing their Business Plan, income and expense data from ARI was used to generate Petrosource’s pro fonna. An SBA Loan Report prepared by BancFirst for Petrosource reported that current customers of ARE had expressed to Petrosource that they would follow them if they decided to leave API.
Immediately following the receipt of Hancock’s and Miller’s resignations submitted on May 14, 2009, ART began receiving notices of termination from many of its largest established customers. Many of the notices had been prepared by Hancock and Miller, in advance of the submitting of their resignations.
Both Hancock and Miller were clearly aware of the contractual relationships between ARJ and its customers. Hancock, in fact, had signed many of the Consulting Agreements on behalf of ARI. Both Hancock and Miller solicited such ARI’s established customers for the sole purpose of encouraging such companies to terminate their contractual agreements with API and hired Hancock’s and Miller’s company. Hancock and Miller also agreed the quicker they could hire away API employees, the faster they could get other customers from ART. Many of the established customers solicited by Hancock and Miller were long term customers of ART, which API reasonably anticipated would continue as customers of ARI for many years to come.
ARI’s employment policies contained an express restriction that employees leaving ARI would not directly solicit customers of API for the sale of services. Notwithstanding this restriction, both Hancock and Miller individually and collectively solicited established customers of API in violation of this provision. While it is anticipated Hancock will argue he did not sign the Covenant Not to Compete, ART maintains he clearly was aware of this Policy and never advised ARI that he did not believe he was subject for the Policy. Hancock’s failure to expressly noti1 ART that he was not in agreement with this Policy constitutes an implied agreement to be bound by the Policy.
ARI’s claims that breach of fiduciary duty and loyalty include the activities of Hancock and Miller prior to theft resignations in which they were using business information of API, and their positions as Chief Financial Officer and Controller, in putting together their Business Plan focused on soliciting established customers of ART. Furthermore, Defendants’ solicitation of ARI’s established customers and preparation of termination notices expressly for the use of ARI’s established customers to terminate their contractual relationships with ARI establishes a factual basis for the interference claims. Finally, the Policy restricting the solicitation of ARI established customers for a period of one year was violated.
A. Grounds for Recovery:
API contends, that (i) both Defendants Hancock and Miller breached their fiduciary duty of loyalty to ART; (ii) all Defendants tortiously interfered with ART’s contractual and business relationships with their established customers; (iii) all Defendants tortiously and intentionally interfered with API’ s prospective economic advantage; and (iv) both Hancock and Miller breach the ARI Policy not to solicit its customers for a period of one (1) year following termination of employment.
B. Damages or Relief Sought.
ART seeks damages including lost earnings and the loss in business value. Four of ART’s largest established customers terminated their agreements with ART based on the solicitation of Hancock and Miller. These clients had generated revenue in excess of $750,000.00 in the twelve months’ prior. Gross profit on such revenue exceeded $250,000.00. The damage estimate that ART will present to the jury is based upon ART’s retention of such clients for periods of five years to fifteen years. Damages range from $1.7 million to $3.1 million, which includes a loss in business value of $307,506.
In addition, ART seeks punitive damages allowed by law.
Defendant deneid all of the Plaintiff's allegations.
Outcome:
Plaintiff's Experts: James D. Hinkle, C.P.A.
Defendant's Experts: Robert Folger, C.P.A.
Comments:
