The Hamilton-Ryker Group, LLC v. Tammy L. Keymon ( 2010 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
July 22, 2009 Session
THE HAMILTON-RYKER GROUP, LLC
v.
TAMMY L. KEYMON
Appeal from the Chancery Court for Weakley County
No. 18946 W. Michael Maloan, Chancellor
No. W2008-00936-COA-R3-CV - Filed January 28, 2010
This appeal involves a noncompete agreement and the Trade Secrets Act. The defendant
employee worked for fourteen years for the plaintiff employer. The employee executed a
covenant not to compete, prohibiting the employee from soliciting the employer’s clients for
one year after termination. During her employment, the employee became the contact person
for a particular customer. The defendant employee was temporarily laid off. The day after
the layoff, the employee and the customer entered into an arrangement under which the laid
off employee performed the same work for the customer that the employer had been
performing. The employee then emailed numerous documents related to the customer from
her work email address to her personal email address. After that, the customer ended the
business relationship with the plaintiff employer. Subsequently, the employer sued the
employee for, inter alia, breach of contract, misappropriation of confidential information,
and violation of Tennessee’s Trade Secrets Act. The trial court entered judgment for the
employer on all counts; the damages award included over $900,000 as doubled damages
under the Trade Secrets Act. The employee now appeals. We affirm, finding that the
covenant not to compete was enforceable despite the lack of any territorial limitation, that
the information emailed to the employee’s personal email was a trade secret, and that the
evidence supports the award of damages.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
H OLLY M. K IRBY, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and J. S TEVEN S TAFFORD, J., joined.
Gregory W. Minton and Brandon Newman, Medina, Tennessee, for the appellant, Tammy
L. Keymon.
Gregory D. Jordan and W. Paul Whitt, Jackson, Tennessee, for the appellee, The Hamilton-
Ryker Group, LLC.
OPINION
F ACTS AND P ROCEEDINGS B ELOW
Appellant/Defendant Tammy L. Keymon 1 (“Keymon”) began working for the
predecessor-in-interest of Appellee/Plaintiff Hamilton-Ryker Group, LLC (“Hamilton-
Ryker”) in 1990. Hamilton-Ryker2 is a human resources company that provides labor
services to its clients. As such, Hamilton-Ryker has an internal staff for its own operations,
and a stable of employees whose services are made available to clients for a variety of needs,
such as temporary employees, staff for special projects, and ongoing operations. Keymon
was a member of Hamilton-Ryker’s internal staff.
Initially, Keymon served as a Service Specialist in Hamilton-Ryker’s Martin,
Tennessee office. Her duties consisted of coordinating applicant, employee, and customer
services in the industrial and clerical temporary service division of Hamilton-Ryker’s
operations. Over time, Keymon’s duties grew to encompass supervision of Hamilton-
Ryker’s operations in Memphis, Tennessee, as well as its facilities in Mount Juliet and La
Vergne, Tennessee.
When Keymon was hired in 1990, she executed an employment agreement with
Hamilton-Ryker that included a noncompete covenant and a confidential information clause.
Over the term of Keymon’s fourteen-year employment with Hamilton-Ryker, the company
changed its legal organization by merging with, and then disassociating from, other labor
services companies. Each time that Hamilton-Ryker changed legal form, Hamilton-Ryker’s
employees, including Keymon, executed new employment agreements.3 Every employment
agreement signed by Keymon included a noncompete covenant and a confidential
1
Keymon is represented by a different attorney on appeal than the attorney who represented her at
trial.
2
In this Opinion, we will use the term “Hamilton Ryker” to include its predecessors in interest.
3
The record includes employment agreements executed by Keymon on four dates: October 26, 1990,
April 4, 1994, January 4, 1996, and November 26, 2001.
-2-
information clause. The operative employment agreement for this appeal, executed in late
2001 (“Employment Agreement”), included the following provisions:
2. CONFIDENTIALITY. The Employee acknowledges that in the
Staffing Services Business customer information developed by providers,
including the Employer is an extremely valuable business asset, which
providers, including the Employer, treat as trade secrets by limiting access to
such customer information to those employees who have a need to know.
Such customer information consists of customer lists, staffing needs of
customers, special staffing needs of customers, customer contacts, customer
staffing history and all aspects of the Employer’s pricing policies and
strategies with respect to customers (collectively “Confidential Information”).
To protect the Employer’s Confidential Information, the Employee
agrees at all times, both during and after termination of his employment with
Employer to keep and retain in strict confidence all of the Employer’s
Confidential Information. The Employee further agrees that all Confidential
Information will be used solely for the benefit of the Employer and not for the
personal benefit of the Employee or any other person or entity, including the
Employer’s competitors.
....
3. COVENANT NOT TO COMPETE. Employee agrees that, during
the period of his employment with Employer and for one (1) year thereafter,
the Employee will not, directly or indirectly, for himself or for any other
person or business entity:
(a) Solicit, cause or authorize to be solicited, for and on behalf of
himself or third parties, any Staffing Services Business from any parties who
are then customers of the Employer; or
(b) Solicit, cause or authorize to be solicited, for and on behalf of
himself or third parties, any Staffing Services Business from any parties who
are then customers of the Employer with whom the Employee did business on
behalf of the Employer; or
(c) Solicit, cause or authorize to be solicited, for and on behalf of
himself or third parties, any Staffing Services Business from any parties who
are then customers or prospective customers of the Employer with respect to
whom the Employee acquired Confidential Information from the Employer;
or
(d) Solicit, cause or authorize to be solicited, on behalf of himself or
third parties any employee of the Employer to terminate his employment
relationship with the Employer or otherwise accept employment with another
employer.
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Keymon began supervising Hamilton-Ryker’s Memphis facility sometime in 1996.
At the time, Hamilton-Ryker’s Memphis operation primarily consisted of providing “dot
prep” services to Federal Express. Keymon supervised some 150 Hamilton-Ryker employees
in manually preparing air bills for Federal Express’s shipping business. In late 2002 or early
2003, Hamilton-Ryker learned that it was going to lose the Federal Express account. Rather
than close the Memphis location, Hamilton-Ryker hired a sales representative to solicit new
clients for the Memphis facility. The sales associate acquired enough new clients for
Hamilton-Ryker’s Memphis operation to keep it open. Keymon remained in charge of
supervising the Memphis facility.
Among the new clients solicited for Hamilton-Ryker’s Memphis facility was Mark
Hoing (“Hoing”). Hoing owned his own company, Oasis, Incorporated (“Oasis”). Oasis’
business consisted of providing shipping services to its nearly one hundred and fifty clients.
Oasis’s clients included communications provider Verizon Communications, Inc. (Verizon”).
Oasis had a contract with Verizon to deliver Verizon’s telephone directories to individual
Verizon customers. The telephone directories had to be prepared for delivery by attaching
mailing labels, and Oasis was not set up to do this task. Consequently, Oasis sought to find
a vendor to prepare Verizon’s directories for delivery. When contacted by Hamilton-Ryker’s
sales representative in 2003, Hoing determined that Hamilton-Ryker was capable of
providing the needed mailing preparation service. Hoing then informed his contact at
Verizon, Terri Janak (“Janak”), of Hamilton-Ryker’s interest in the work. Together, Hoing
and Janak decided to hire Hamilton-Ryker to attach the mailing labels to Verizon’s
directories. The arrangement among Oasis, Verizon, and Hamilton-Ryker was verbal and
for no stated term.
In the summer of 2003, Hamilton-Ryker’s Memphis facility began attaching
Verizon’s labels to its telephone directories. The work was done on a project-by-project
basis, with each project focused on a specified geographic area. Keymon supervised
Hamilton-Ryker’s employees and was Hamilton-Ryker’s contact person with both Verizon
and Oasis. For each group of directories to be shipped, a Verizon employee would email
Keymon documents containing the mailing addresses and the number of phone directories
to be processed. The emailed mailing addresses would then be reformatted, using Hamilton-
Ryker’s computer software program, in a manner that permitted the mailing addresses to be
printed as mailing labels. Oasis would deliver the Verizon directories to the Memphis
location, and Hamilton-Ryker employees would then attach the labels to the directories.
Thereafter, Oasis would pick up the labeled directories and deliver them to the appropriate
addresses. After completion of each project, Keymon would send a Hamilton-Ryker invoice
directly to Verizon, and Verizon would send its payment directly to Hamilton-Ryker, without
going through Oasis. Thus, while Oasis was a “gatekeeper” to Verizon, Hamilton-Ryker also
had a direct relationship with Verizon.
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For each project, Hamilton-Ryker was paid by the number of Verizon telephone
directories that it processed. As such, Hamilton-Ryker’s revenues from its work for Verizon
fluctuated. At one point, Keymon prepared an analysis for Hamilton-Ryker showing that,
on average, the Memphis facility’s work for Verizon generated a net profit of 32.9% of the
amounts billed to Verizon.
During the remainder of 2003, the arrangement among Hamilton-Ryker, Oasis and
Verizon continued successfully. Hamilton-Ryker contacted Verizon about doing all of
Verizon’s directory preparation work in 2004. As a result of those discussions, Verizon
emailed Hamilton-Ryker its production schedule for all of 2004. Hamilton-Ryker’s directory
processing work for Verizon continued in 2004 on a project-by-project basis.
Meanwhile, in the early summer of 2004, Hamilton-Ryker decided to do a re-
organization that included elimination of Keymon’s job position. However, Hamilton-Ryker
considered Keymon to be a valuable employee and wanted to retain her. In addition,
Hamilton-Ryker was aware that Keymon wanted to reduce her work-related travel.
Therefore, in June 2004, Hamilton-Ryker officers offered Keymon a new position as a
Special Projects Manager at the same salary she had been receiving. The Hamilton-Ryker
officers told Keymon that the newly-created position would allow her to be more efficient
and would decrease the amount of travel required of her. Keymon, however, believed that
the new position would require even more travel, and she perceived it to be a “step
backwards” in her career. Although Hamilton-Ryker tried to persuade Keymon to accept the
new Special Projects Manager position, she decided to reject it. Keymon’s email to the
Hamilton-Ryker officers, rejecting the offer of the new position, stated that she did not intend
for them to consider her rejection to be her resignation from Hamilton-Ryker.
Shortly thereafter, on July 6, 2004, in light of the elimination of Keymon’s job
position and her rejection of the new position, Hamilton-Ryker Vice President Kelly
McCreight (“McCreight”) met with Keymon to discuss Keymon’s employment status. At
the meeting, Keymon and McCreight agreed that Keymon would be temporarily laid off for
a ninety-day period, effective Monday July 12, 2004 until Friday October 8, 2004.
McCreight told Keymon that her last day of work before the temporary layoff commenced
would be Friday July 9, 2004. They agreed that, during the temporary layoff, Hamilton-
Ryker would try to find a position for Keymon at one of Hamilton-Ryker’s other locations
that would require less travel. If no such position could be found, they agreed, then they
would discuss a permanent layoff in October 2004. As McCreight would be supervising
Hamilton-Ryker’s Memphis facility during Keymon’s temporary layoff, Keymon agreed to
assist McCreight’s transition into that role.
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On the morning of Saturday July 10, 2004, Keymon told Hoing by telephone that
Hamilton-Ryker had laid her off. In that telephone conversation, Keymon and Hoing agreed
that Keymon would take over the telephone directory preparation work that Hamilton-Ryker
had been performing for Verizon. Hoing then contacted Terri Janak at Verizon. Janak was
not pleased that Hamilton-Ryker had laid off Keymon and agreed that Oasis, with Keymon,
would perform Verizon’s telephone directory preparation work.
Later in the afternoon of July 10, 2004, Keymon utilized her Hamilton-Ryker email
address to email approximately fifty-six documents concerning Hamilton-Ryker’s work for
Verizon to Keymon’s personal email address. The documents included Verizon’s anticipated
production schedule for all of 2004, a profit-loss analysis for the completed projects,
Verizon’s mail address listings converted into a format capable of being printed as labels,
and Hamilton-Ryker’s invoices to Verizon for the June and July 2004 projects. Within the
next several days, Keymon’s Hamilton-Ryker email account was terminated.
Shortly thereafter, on July 16, 2004, Keymon began billing Hoing for directory
preparation work performed under Oasis’s agreement with Verizon. Twelve days later, on
July 26, 2004, Janak emailed McCreight at Hamilton-Ryker to inform him that Verizon
would no longer utilize Hamilton-Ryker for its directory preparation needs. In the email,
Janak told McCreight simply that Verizon had “decided to pursue another avenue for [its]
mailings.”
During this time-frame, Keymon began drawing unemployment benefits for her layoff
from Hamilton-Ryker. Hamilton-Ryker was unaware of Keymon’s arrangement with Oasis
and Verizon.
Throughout the term of Keymon’s three-month layoff from Hamilton-Ryker, she
billed Hoing for work performed for Verizon. Initially, Keymon billed Hoing under “Adams
& Associates,” a business entity created by her then-husband Anthony Adams 4 for his private
investigation work. Keymon later established an entity called Keymon Management Group
for the purpose of billing Hoing and Oasis for the Verizon work. Eventually, Keymon hired
employees to assist her with the Verizon work; these workers included some Hamilton-Ryker
employees at the Memphis facility who had worked on Hamilton-Ryker’s directory
preparation for Verizon under Keymon’s supervision. Initially, Keymon only attached
mailing labels to Verizon’s directories, the same work Hamilton-Ryker had been doing for
Verizon. After a while, Keymon began taking on tasks that Hamilton-Ryker had not
performed for Verizon, such as data entry and field checking by making telephone calls to
customers to confirm receipt of the directories.
4
During the pendency of the instant lawsuit with Hamilton-Ryker, Keymon and Adams divorced.
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At the end of the three-month temporary layoff period, Keymon and Hamilton-Ryker
did not reach an agreement for Keymon to return to Hamilton-Ryker. Consequently, as they
had discussed, they agreed to sever the employment relationship. Thus, on October 22, 2004,
Keymon executed a severance agreement in which she agreed to sever her employment and
release all claims against Hamilton-Ryker (“Severance Agreement”). In consideration, under
the Severance Agreement, Keymon was to receive a total of $6000, to be paid by Hamilton-
Ryker in bi-weekly installments. The Severance Agreement stated that it did “not revoke,
supersede, replace or modify any prior agreements and understandings between [Hamilton-
Ryker] . . . and [Keymon] concerning restrictive covenants, non-disclosure of information,
non-solicitation of clients or non-competition with [Hamilton-Ryker]” and specifically
referenced Keymon’s Employment Agreement.5 In the Severance Agreement, Keymon also
agreed to fully cooperate with Hamilton-Ryker in any investigation into a breach of an
employment agreement, by another employee or by Keymon herself, including an
investigation “concerning the wrongful diversion of business, interference with a contractual
relationship and breach of the duty of loyalty.” Thereafter, Hamilton-Ryker deposited into
Keymon’s bank account, by direct deposit, the first bi-weekly payment due to Keymon under
the Severance Agreement.
At some point, Hamilton-Ryker became aware that Keymon might be doing the mail
preparation work on Verizon’s telephone directories that Hamilton-Ryker had previously
been performing. Therefore, on November 11, 2004, in accordance with the terms of
Keymon’s Severance Agreement, Hamilton-Ryker’s attorney sent a letter to Keymon
requesting her cooperation with its investigation into a possible breach of the terms of an
employment agreement with an unidentified employee or former employee. The letter
sought, among other things, copies of Keymon’s cellular phone bills. Although Keymon
produced to Hamilton-Ryker some of the requested documents, Hamilton-Ryker believed that
Keymon had not produced all of the documents it sought. Moreover, Keymon forwarded to
Hamilton-Ryker a check for $1157.56, made payable to Hamilton-Ryker, in an apparent
attempt to return the first payment made to her under her Severance Agreement. Hamilton-
Ryker returned the uncashed check to Keymon.
On February 5, 2005, Hamilton-Ryker filed the instant lawsuit against Keymon,
alleging breach of contract. In the initial complaint, Hamilton-Ryker alleged only that
Keymon failed to produce to Hamilton-Ryker the documents it requested, and thus had
breached the provisions in her Severance Agreement requiring her to fully cooperate with the
company’s investigation. Keymon’s answer denied that she had breached the Severance
5
The Severance Agreement refers to the Employment Agreement as an attachment. However, the
copy of the Severance Agreement in the appellate record does not have a copy of any employment agreement
between Keymon and Hamilton-Ryker attached as an exhibit.
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Agreement, and claimed that she had produced the documents that Hamilton-Ryker
requested. Later, when Hamilton-Ryker refused to make payments to Keymon under the
Severance Agreement, Keymon amended her answer to include a counterclaim for breach
of the Severance Agreement. Discovery, and discovery disputes, ensued.
During the course of discovery, Hamilton-Ryker learned of the on-going business
arrangement among Keymon, Oasis and Verizon. Hamilton-Ryker also made contact with
Keymon’s by-then estranged husband, Anthony Adams. As a result, Hamilton-Ryker
amended its complaint to state claims against Keymon based on the work she performed after
being laid off from Hamilton-Ryker, related to the Verizon telephone directories. Hamilton-
Ryker alleged that Keymon had breached the noncompete covenant and the confidential
information clause of her Employment Agreement by using Hamilton-Ryker’s confidential
information after her layoff, and by soliciting business from Hamilton-Ryker customers Oasis
and Verizon. Hamilton-Ryker alleged that Keymon violated the Uniform Trade Secrets Act
(“Trade Secrets Act” and, alternatively, “Act”), codified at Tennessee Code Annotated § 47-
25-1701 et seq., by emailing the Verizon-related Hamilton-Ryker documents to herself at her
personal email address. Asserting that Keymon’s conduct was willful and malicious,
Hamilton-Ryker sought exemplary damages under the Trade Secrets Act, section 47-25-
1704(b). Hamilton-Ryker also included claims for violation of Tennessee Code Annotated
§ 47-5-109 by inducing breach of contract; intentional interference with business
relationships; breach of trust; breach of the duty of loyalty; breach of fiduciary duty;
conversion; breach of duty against self dealing or corporate opportunity doctrine; and unjust
enrichment.
Keymon answered Hamilton-Ryker’s amended complaint by denying the allegations.
The case was set for a bench trial.
During the pendency of the litigation, Keymon continued to perform the mail
preparation work for Hoing and Oasis on the Verizon telephone directories. By the date of
the trial, Keymon had billed approximately $1,450,388 for her Verizon-related work.
The trial was conducted on March 4, 2008. In the proceedings, the trial court heard
testimony from Hamilton-Ryker Vice President Kelly McCreight; Hamilton-Ryker co-owner
Crawford Gallimore; Keymon’s ex-husband Anthony Adams; Oasis owner Hoing; and
Keymon. Nineteen exhibits were entered into evidence, including Keymon’s cellular phone
records and Keymon’s invoices to Oasis and Verizon.
At the outset, McCreight gave the trial court background about Keymon’s
employment with Hamilton-Ryker. In the course of her work, McCreight testified, Keymon
developed relationships with clients, and in particular she was Hamilton-Ryker’s
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representative for the Oasis and Verizon work. McCreight said that Keymon did a “fantastic
job” as a manager and “knew how to get the most out of the workers.” He explained that
Hamilton-Ryker’s elimination of Keymon’s job position was not an effort to get rid of her,
because they valued her work. McCreight said that Hamilton-Ryker created the new position
for Keymon to minimize her travel and thereby allow her to be more efficient. He said that,
despite Keymon’s initial rejection of the new position, Hamilton-Ryker’s management hoped
that she would eventually accept it during the temporary layoff period.
During his testimony, McCreight reviewed the Verizon-related documents that
Keymon emailed to her personal email address on the afternoon of July 10, 2004. He stated
that the documents included “pretty much everything that was needed to service [the
Verizon] account.” He observed that the documents included Verizon’s list of mailing
addresses that had been reformatted using Hamilton-Ryker’s computer software, so that they
could be printed as mailing labels. McCreight testified that Hamilton-Ryker considered the
information in the documents to be confidential and took steps to limit access to the
information. These steps included using a company server that was protected by a firewall
to prevent outside access to the information. Additionally, Hamilton-Ryker permitted
employees to access only the documents needed by the employee to complete his job.
Moreover, Hamilton-Ryker’s employment agreements routinely included a confidential
information clause designed to prevent dissemination of the information. Finally, McCreight
testified that the documents in Keymon’s email included much more information than was
needed for Keymon to assist McCreight in completing Hamilton-Ryker’s invoices to Verizon
for July 2004.
Keymon’s ex-husband, Anthony Adams, testified about overhearing Keymon’s
telephone conversations with Hoing after Hamilton-Ryker laid her off, as well as Keymon’s
work for Hoing and Verizon thereafter. Adams testified that, on Friday, July 9, or Saturday,
July 10, 2004, he overhead a cell phone conversation between Keymon and Hoing in which
Keymon informed Hoing that she had been laid off. In the conversation, Adams said,
Keymon agreed with Hoing to take over the Verizon telephone directory work and move it
to Hoing’s facility. After that, Adams said, he and Keymon “processed books, printed labels,
did shipping of books. The same thing that they were doing at Hamilton-Ryker.” While
Keymon was drawing unemployment benefits, she billed Oasis for the Verizon work under
his company, Adams & Associates. Adams testified, at some point, that he and Keymon
began doing additional work for Oasis and Verizon, such as checking to see that the
telephone directories had been properly delivered. Later, Adams said, Keymon hired
temporary associates from Hamilton-Ryker to assist with the Verizon work.
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Hamilton-Ryker called Mark Hoing to testify.6 Hoing testified about his business
relationship with Keymon. Hoing said that Hamilton-Ryker had done a good job of
processing the Verizon telephone directories. His sole contact with Hamilton-Ryker, Hoing
said, was Keymon. Hoing testified that Keymon called him to inform him that Hamilton-
Ryker laid her off. Referring to Verizon’s telephone directory work, Hoing said, he and
Keymon “sat down and basically said that we would take it in-house. Talked that over with
Verizon; and that’s what we did, we brought it in-house.” After that, Keymon performed
the same work for Verizon that Hamilton-Ryker had been performing. Later, Keymon
performed other tasks related to Verizon as well, such as work in telecommunications.
Crawford Gallimore, co-owner of Hamilton-Ryker, testified about Hamilton-Ryker’s
damages resulting from Keymon’s conduct. Prior to being laid off, Gallimore said, Keymon
had prepared a profit analysis for Hamilton-Ryker’s work on the Oasis and Verizon account.
The profit analysis showed that, on average, Hamilton-Ryker made a 32.9% profit on each
directory processing project. To determine Hamilton-Ryker’s lost profits, he applied this
profit percentage to the actual amounts Keymon billed Oasis and Verizon after Hamilton-
Ryker lost the account. Using this method, Gallimore calculated that Hamilton-Ryker had
lost $94,307 in profits from July 2004 until October 2005, that is, the three-month term of
the temporary layoff plus the one-year term of the noncompete covenant measured from the
date of the Severance Agreement. Gallimore calculated that Hamilton-Ryker lost $477,178
in profits during the time period from July 2004 until the date of trial.
Keymon then testified on her own behalf. Keymon acknowledged signing an
employment agreement that included a noncompete clause.7 She said that she had told
Hamilton-Ryker that she was unhappy with the amount of travel she was doing in her job.
When Hamilton-Ryker eliminated her job position and offered her a new position, she said,
she perceived that the new job would require even more travel of her. Consequently, she
said, she rejected the new position and thus was left without a job.
After she got laid off, Keymon said, she continued to do “a little bit” of work for
Hamilton-Ryker, namely, processing some Verizon invoices for them. Keymon stated that
she emailed the Verizon documents from her Hamilton-Ryker email address to her personal
email account in order to create billing invoices for Hamilton-Ryker. Shortly after that,
Hamilton-Ryker terminated her work email account access.
6
At the time of trial, Hoing was working for an air freight company called Seko.
7
Keymon argued that the noncompete prohibited her from performing “staffing services,” but the
work she was doing for Verizon was “outsourcing” and thus not prohibited under the non-compete clause.
This argument was rejected by the trial court and is not raised as an issue on appeal.
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Keymon then related her version of her conversation with Mark Hoing after she was
laid off from Hamilton-Ryker. Keymon said that Hoing contacted her, and that the contact
occurred several days after her layoff:
Q. . . . Now, after you went on temporary layoff, . . . how did the
conversation come up between you and Mark Hoing?
A. Mark Hoing called me a few days after my layoff and asked if I would
be interested in helping him do some – with the hand delivery side of
it, do some field operations, management, some data entry, help him
with his standard operation manual, and that sort of thing.
And I said, “Well, I’m not with Hamilton-Ryker any more.”
And so that’s how that proceeded.
Keymon testified that she agreed to do the work because she was no longer employed by
Hamilton-Ryker, and Hoing did not ask her to do the address labels for Verizon’s telephone
directories.8 Hamilton-Ryker, Keymon said, had done only mailing labels for the Verizon
telephone directories. The work she invoiced to Oasis, she asserted, was for work that had
nothing to do with mailing labels, namely, hand-delivery, computer work, data entry,
telechecking and field checking, and thus did not violate her noncompete agreement.
Keymon conceded that she hired a couple of Hamilton-Ryker employees to assist her, but
said that she thought that they maintained their jobs with Hamilton-Ryker and worked with
Keymon “in the evenings.”
At the conclusion of the proof, the trial court issued an oral ruling. It found that “by
the overwhelming preponderance of the proof” Keymon was liable to Hamilton-Ryker on all
claims asserted against her. In its oral ruling, the trial court awarded Keymon a judgment of
$6000 on her counterclaim on the Severance Agreement, but took under advisement the issue
of the damage award to be made against Keymon in favor of Hamilton-Ryker.
On April 7, 2008, the trial court entered a written order restating its prior oral ruling
and awarding damages. At the outset, the trial court rejected Keymon’s argument that the
8
Keymon also asserted that Verizon was Hamilton-Ryker’s customer, but that Hoing was not a
customer of Hamilton-Ryker. Because she was paid by Hoing’s company, Oasis, and was not paid directly
by Verizon, Keymon argued, she did not solicit one of Hamilton-Ryker’s “customers” and thus was not in
breach of her noncompete. This argument was also rejected by the trial court and is not raised as an issue
on appeal.
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noncompete agreement was not enforceable because it did not contain a geographic
boundary. The trial court stated that Keymon’s “actions occurred in an existing area with an
existing client or customer, and as such, the absence of a geographic boundary is of no
issue.” The trial court then went on to find:
11. The Defendant also, while she was employed by the Plaintiff, downloaded
data from her company computer to her home computer which contained an
expandable folder full of confidential, proprietary and trade secrets
information of the Plaintiff.
12. The argument by the Defendant that the information was needed for the
purpose of invoicing is without merit, as the time line and all the facts and
circumstances require the Court—having observed the witness testimony first-
hand—to conclude that the information was used to improperly go into a
competing business against the Plaintiff.
13. Shortly after the Defendant improperly downloaded the confidential,
proprietary and trade secrets information of the Plaintiff, the Defendant was
temporarily laid-off by the Plaintiff.
14. Shortly after this time, the Defendant’s customers, Verizon and Oasis (Mr.
Hoing’s company), terminated their business relationships with the Plaintiff.
15. As soon as the Defendant was temporarily laid-off by the Plaintiff, the
Defendant began providing the very same staffing services to Verizon and
Oasis (Mr. Hoing’s company) that the Plaintiff had provided to these entities
during the Defendant’s employment with the Plaintiff, and which the
Defendant handled for the Plaintiff.
16. The Court finds that the cause of the termination of the contract and
business relationship between the Plaintiff and its customers, Verizon and
Oasis (Mr. Hoing’s company), were the direct and intentional actions of the
Defendant to solicit and appropriate the contracts and business for her own
personal benefit.
17. The actions of the Defendant in intentionally soliciting and appropriating
the contracts and business of Verizon and Oasis (Mr. Hoing’s company) were
taken no later than July 10, 2004, during which time the Plaintiff was still an
active employee of the Plaintiff.
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18. Furthermore, the improper downloading of the confidential, proprietary
and trade secrets information of the Plaintiff by the Defendant occurred mere
hours after the Defendant intentionally solicited and appropriated the contracts
and business of Verizon and Oasis (Mr. Hoing’s company).
19. As such, the Court finds that by the overwhelming preponderance of the
proof in this case—having personally observed the witness testimony—that the
Defendant has breached her contractual, common law and statutory duties
owed to the Plaintiff.
The trial court awarded Hamilton-Ryder, inter alia, $94,307 for breach of the
Employment Agreement and $48,283.20 in attorney’s fees under the Employment
Agreement. It also found that Keymon procured Verizon’s breach of its contract with
Hamilton-Ryker, in violation of Tennessee Code Annotated § 47-50-109. The damages for
this offense were also $94,307, and these were trebled under the statute, for a total award
under section 47-50-109 of $282,921. The trial court found that Hamilton-Ryker’s total
actual damages were $477,178, resulting from Keymon’s intentional interference in
Hamilton-Ryker’s business relationships with Oasis and Verizon, Keymon’s breach of her
common law and contractual duties of loyalty, trust and obligation to refrain from self-
dealing, Keymon’s conversion of Hamilton-Ryker’s assets, and Keymon’s unjust enrichment.
Under the Trade Secrets Act, the trial court found that Hamilton-Ryker’s actual damages
were, again, $477,178. Pursuant to section 47-25-1704(b), this amount was doubled as
exemplary damages, due to the willful and malicious nature of Keymon’s conduct, for a total
award of $954,356. After setting forth the damages for each claim, the trial court awarded
a judgment in favor of Hamilton-Ryker in the amount of $948,356 as damages for all causes
of action, after offsetting Keymon’s $6000 award under the Severance Agreement. From this
judgment, Keymon now appeals.9
I SSUES ON A PPEAL AND S TANDARD OF R EVIEW
On appeal, Keymon presents the following issues:
9
After Keymon filed her notice of appeal, she filed a motion in this Court to remand to the trial court
for consideration of her motion to set aside the trial court’s final order pursuant to Rule 60.02 of the
Tennessee Rules of Civil Procedure. In the Rule 60.02 motion, Keymon alleged that the testimony of her
ex-husband Adams had been procured through fraud, allegedly based on a secret agreement with Hamilton-
Ryker for Adams to provide favorable testimony in exchange for a promise not to sue. The case was
remanded to the trial court for consideration of Keymon’s Rule 60.02 motion. The trial court rejected the
motion as based on hearsay evidence. The trial court also concluded that the weight of the evidence
supported the final order even if Adams’s testimony were stricken.
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1) Whether the trial court erred in upholding and enforcing all provisions of
the Employment Agreement or whether the entire Employment Agreement, or
certain provisions of the Employment Agreement, should have been held
unenforceable pursuant to law or public policy;
2) Whether Keymon breached any duty owed to Hamilton-Ryker;
3) Whether the trial court erred in the calculation of damages by awarding
damages for nearly four years anticipated profits and by doubling alleged
actual damages for exemplary damages;
4) Whether the finding of unjust enrichment should be set aside;
5) Whether the trial court erred in holding that damages awarded to Hamilton-
Ryker for inducing breach of contract should be trebled in accordance with
Tennessee Code Annotated § 47-50-109; and
6) Whether the trial court erred in refusing to grant Keymon additional time
to conduct further investigation and formal discovery in support the Rule 60.02
motion to set aside judgment, especially given the lack of notice on the motion
hearing.
As this case was tried by the trial court sitting without a jury, we review the trial
court’s findings of fact de novo with a presumption of correctness unless the evidence
preponderates to the contrary. T ENN. R. A PP. P. 13(d); Rawlings v. John Hancock Mut. Life
Ins. Co., 78 S.W.3d 291, 296 (Tenn. Ct. App. 2001). “The trial court’s credibility
assessments are entitled to great weight on appeal, because the court had the opportunity to
hear the testimony and observe the demeanor of the witnesses.” Columbus Med. Servs.,
LLC v. Thomas, No. W2008-00345-COA-R3-CV, 2009 WL 2462428, at *14 (Tenn. Ct.
App. Aug. 13, 2009), no perm. app. (citing C&W Asset Acquisition, LLC v. Oggs, 230
S.W.3d 671, 676 (Tenn. Ct. App. 2007)). The trial court’s conclusions of law are reviewed
de novo without a presumption of correctness. Vantage Tech., LLC v. Cross, 17 S.W.3d 637,
644 (Tenn. Ct. App. 1999) (citing Campbell v. Fla. Steel Corp., 919 S.W.2d 26, 35 (Tenn.
1996); Presley v. Bennett, 860 S.W.2d 857, 859 (Tenn. 1993)).
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A NALYSIS
Covenant Not to Compete
Keymon first contends that the trial court erred in enforcing the covenant not to
compete in her Employment Agreement. She asserts that the lack of any geographic
limitation in the noncompete clause makes its restrictions unreasonably broad, and thus
renders it unenforceable.10 The trial court held that the lack of any geographical boundary
in the noncompete clause was “of no issue” because Keymon’s conduct occurred in the same
geographic area in which she worked for Hamilton-Ryker, with an existing customer.
In general, “covenants not to compete are disfavored in Tennessee but will be
enforced if ‘they are deemed reasonable under the particular circumstances.’ ” Columbus
Med. Servs., LLC, 2009 WL 2462428, at *14 (quoting Allright Auto Parks, Inc. v. Berry,
409 S.W.2d 361, 363 (Tenn. 1966)). Therefore, the reasonableness of the noncompete
provision, and thus its enforceability, is not evaluated in the abstract; rather, it is determined
in the context of the circumstances presented in the case before the court.
In general, one of the factors to be considered in determining the reasonableness of
a covenant not to compete is whether the territorial limitations in the covenant are reasonable.
Columbus Med. Servs., LLC, 2009 WL 2462428, at *15 (quoting Murfreesboro Med.
Clinic, P.A. v. Udom, 166 S.W.3d 674, 678 (Tenn. 2005)). The “territorial limits must be
no greater than necessary to protect the business interest of the employer.” Id. (quoting
Udom, 166 S.W.3d at 678).
In some cases, however, a restriction against soliciting the employer’s customers can
in effect substitute for a geographic limitation, by stating the impermissible actions of the
employee by other means. For example, in Thompson, Breeding, Dunn, Creswell & Sparks
v. Bowlin, 765 S.W.2d 743 (Tenn. Ct. App. 1987), the defendant accountant’s employment
agreement with the plaintiff accounting partnership included a covenant not to compete. Id.
at 743-44. The covenant prohibited the accountant from soliciting the partnership’s clients
for three years after termination of his employment. Id. The covenant had no territorial
limitation. See id. After leaving the accounting partnership, the accountant solicited and
10
At trial, Keymon also contended that the noncompete covenant was unenforceable because she was
already employed when Hamilton-Ryker asked her to sign it, and thus it failed for lack of consideration. The
trial court correctly held that Keymon’s continued employment was adequate consideration for the
noncompete agreement. See Cummings, Inc. v. Dorgan, No. M2008-00593-COA-R3-CV, 2009 WL
3046979, at *17 (Tenn. Ct. App. Sept. 23, 2009), no perm. app. (citing Ramsey v. Mut. Supply Co., 427
S.W.2d 849, 852-53 (Tenn. Ct. App. 1968)). This was not raised as an issue on appeal.
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began providing accounting services to twenty of the partnership’s current clients. Id. at 744.
The partnership sued the accountant to enforce the noncompete clause in the employment
contract. Id. at 743. The trial court held that the covenant was unenforceable, in part
because it did not include a territorial limitation. Id. at 744. The employer appealed. On
appeal, this Court held that an employer has a legitimate protectable business interest in its
current clients. It found that the omission of a territorial limitation in the noncompete
covenant was not fatal. Id. at 745-46. The Court explained:
Rather than being limited by geographic boundaries, [Bowlin] is only
prohibited from soliciting the business of and working for a specific group of
persons, the Partnership’s clients . . .. Bowlin knew who these clients were .
. .. “[A]s the specificity of limitation regarding the class of person [sic] with
whom contact is prohibited increases, the need for limitation expressed in
territorial terms decreases.”
Id. (quoting Seach v. Richards, Dieterle & Co., 439 N.E.2d 208, 213 (Ind. Ct. App. 1982)).
The appellate court concluded that the restraint on the employee was reasonably
commensurate with the goal of protecting the employer’s legitimate business interest, and
thus that the covenant not to compete was enforceable. Id. at 746.
As in Bowlin, although the noncompete provision in Keymon’s Employment
Agreement did not state a territorial limitation, it prohibited her from soliciting business from
entities who were customers of Hamilton-Ryker with whom Keymon did business on behalf
of Hamilton-Ryker. The actions that were prohibited after Keymon’s termination were
clearly delineated by this limitation, and the restraint on Keymon was reasonable under the
circumstances. Thus, we agree with the conclusion of the trial court and affirm its holding
that the covenant not to compete in Keymon’s Employment Agreement was enforceable.
Trade Secrets Act
The largest award of damages against Keymon was made pursuant to Tennessee’s
Uniform Trade Secrets Act, Tennessee Code Annotated §§ 47-25-1701 to -1709. The
damage awards under other legal theories were subsumed within the Trade Secrets Act
damage award. Therefore, we consider next the issues raised on appeal under the Trade
Secrets Act.
On appeal, Keymon contends that the Verizon-related information she emailed to her
personal email address on July 10, 2004 did not constitute a “trade secret” within the
meaning of the Trade Secrets Act. She argues that the trial court erred in finding that her
actions were “willful and malicious” under the Trade Secrets Act, which was the basis for
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the trial court’s award of exemplary damages. Finally, she asserts that the trial court erred
in its calculation of damages pursuant to the Trade Secrets Act.
Overview
Under Tennessee’s common law, a plaintiff business could assert a claim for
misappropriation of a trade secret if the plaintiff proved the following elements:
(1) the existence of a trade secret; (2) communication of that trade secret to the
defendant while the defendant was in a position of trust and confidence; (3)
use of the trade secret; and (4) damage to the plaintiff.
Douglas F. Halijan, The Past, Present, and Future of Trade Secrets Law in Tennessee: A
Practitioner’s Guide Following the Enactment of the Uniform Trade Secrets Act, 32 U. M EM.
L. R EV. 1, 9 (2001) (citing Hickory Specialties, Inc. v. B & L Labs., Inc., 592 S.W.2d 583,
586 (Tenn. Ct. App. 1979)).11 In particular, employees are “bound by the general duty not
to disclose confidential information or trade secrets belonging to the former employer;
violation of this duty gives rise to a cause of action in the employer to obtain relief against
the former employee.” Wright Med. Tech., Inc. v. Grisoni, 135 S.W.3d 561, 588 (Tenn. Ct.
App. 2001) (citing Ed Nowogroski Ins., Inc. v. Rucker, 971 P.2d 936, 941-42 (Wash.
1999)).
Under the common law, a trade secret was defined as “any formula, process, pattern,
device or compilation of information that is used in one’s business and which gives him an
opportunity to obtain an advantage over competitors who do not use it.” Id. (quoting
Hickory Specialties, Inc., 592 S.W.2d at 586). Tennessee cases “used the terms ‘trade
secret’ and ‘confidential information’ interchangeably, holding that confidential business
information such as customer lists, knowledge of the buying habits and needs of particular
clients, and pricing information, was protectable only to the extent that it satisfied the
definition of a trade secret.” Halijan, supra, at 13; see Grisoni, 135 S.W.3d at 588(“Confidential information is closely analogous to a trade secret and warrants similar
protection.”). To determine whether the trade secret or confidential information was
protectable, courts considered factors such as the measures taken by the business to guard the
secrecy of the information, the value of the information, and the ease with which it could be
duplicated or acquired by others. Halijan, supra, at 9 (citing Venture Express, Inc. v. Zilly,
973 S.W.2d 602, 606 (Tenn. Ct. App. 1998)).
11
The Halijan article in the University of Memphis Law Review provides an excellent overview of
Tennessee’s Uniform Trade Secrets Act.
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Enacted in 2000, Tennessee’s Trade Secrets Act “preempts and displaces conflicting
or inconsistent common law in Tennessee regarding the misappropriation of trade secrets.”
Id. at 5 (citing T.C.A. § 47-25-1708(a) (Supp. 2000)). The Act provides that a plaintiff may
obtain injunctive relief and/or an award of damages for “misappropriation” of a “trade
secret” as those terms are defined in the Act. See T.C.A. § 47-25-1702(2), (4) (providing
definitions of “misappropriation” and “trade secret,” respectively); T.C.A. § 47-25-1703
(providing for injunctive relief); T.C.A. § 47-25-1704 (providing for damages).
The term “misappropriation” has multiple definitions under the Trade Secrets Act.
The definition most applicable to the case at bar is the following: “[a]cquisition of a trade
secret of another by a person who knows or has reason to know that the trade secret was
acquired by improper means.” T.C.A. § 47-25-1702(2)(A) (2001). The term “trade secret”
has a statutory definition that is similar to the common law definition:
[I]nformation, without regard to form, including, but not limited to, technical,
nontechnical or financial data, a formula, pattern, compilation, program,
device, method, technique, process, or plan that:
(A) Derives independent economic value, actual or potential, from not
being generally known to, and not being readily ascertainable by proper
means by other persons who can obtain economic value from its
disclosure or use; and
(B) Is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy.
T.C.A. § 47-25-1702(4) (2001). The Tennessee legislature adopted the definition of “trade
secrets” under the Uniform Trade Secrets Act, and also adopted additions which make
Tennessee’s definition even broader than the definition in the Uniform Act. Specifically,
“Tennessee’s definition of ‘trade secret’ includes any information ‘without regard to form,
including, but not limited to, technical, nontechnical or financial data.’ ” Halijan, supra, at
21. Tennessee’s definition “also adds the word ‘plan’ to the non-exclusive list of information
and items that may constitute a trade secret.” Id. at 21-22. Thus, the definition of a “trade
secret” under the Act is sufficiently broad to include information which at common law
would have been considered confidential information. In contrast to the common law, for
the information to be protectable under the Trade Secrets Act, the business need only show
“reasonable” efforts to maintain the secrecy of the information. Id. at 21.
Notably, under the Trade Secrets Act, the damages recoverable for the
misappropriation of a trade secret “can include both the actual loss caused by
misappropriation and the unjust enrichment caused by misappropriation that is not taken into
account in computing actual loss.” T.C.A. § 47-25-1704(a) (2001). If the court finds that
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the misappropriation was “willful and malicious,” it may award “exemplary damages” by
doubling the award of damages. T.C.A. § 47-25-1704(b) (2001).
Trade Secret
On appeal, Keymon asserts that she did not make use of any information that would
constitute a “trade secret.” She does not dispute that she sent to her personal email address
a variety of Verizon-related documents and information. She argues, however, that she could
have easily obtained the same information directly from Verizon, and that the process of
assisting Verizon in preparing its telephone directories for distribution constituted general
knowledge that was well known or easily ascertainable.
In the case at bar, Keymon emailed herself fifty-six documents pertaining to
Hamilton-Ryker’s work on the Oasis and Verizon account. These documents included
Verizon’s anticipated production schedule for the remainder of the calendar year, Hamilton-
Ryker’s internal profit analysis of the work, mailing addresses from Verizon that had already
been reformatted with Hamilton-Ryker’s computer software to be printed as mailing labels,
and Hamilton-Ryker’s invoices for its most recent work on the Verizon account. McCreight
testified that these documents contained everything needed to service the Verizon account.
The trial court found that Keymon had emailed to herself “an expandable folder full of
confidential, proprietary and trade secrets information” of Hamilton-Ryker.
Regardless of whether Keymon could have acquired the mailing addresses directly
from Verizon, the aggregate of the information that Keymon emailed to herself may be
considered a trade secret. Even if Keymon could have obtained “individual pieces of
information” by other means, the integration and aggregation of it may be deemed
confidential or a trade secret. See Grisoni, 135 S.W.3d at 589 (quoting Essex Group, Inc.
v. Southwire Co. 501 S.E.2d 501, 503 (Ga. 1998)). Moreover, even if the information could
have been developed by independent means, “it may be protectible if the former employee
does not develop it by independent [means] but in fact obtains his knowledge . . . from his
former employer and then uses this knowledge to compete with the former employer.” Id.As noted by the trial court, the speed with which Keymon utilized this information to
begin competing directly with Hamilton-Ryker - a mere six days elapsed between the
acquisition of the information and the commencement of billable work by Keymon -
demonstrates its independent economic value. Moreover, Keymon benefitted from the use
of Hamilton-Ryker’s software, inasmuch as the mailing addresses obtained from Verizon had
been reformatted so as to be printed on mailing labels, to be affixed to Verizon’s telephone
directories. Further, the documents included Verizon’s anticipated production schedule and
the details of Hamilton-Ryker’s invoices to Verizon. On the element of secrecy, McCreight
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testified that Hamilton-Ryker took steps to keep the information confidential, including use
of a firewall-protected server, confidentiality agreements with employees, and limitations on
the employees’ electronic access to documents.
Considering the aggregate of the information in the Verizon-related documents that
Keymon emailed to herself, we must conclude that it meets the definition of a “trade secret”
under Tennessee Code Annotated § 47-25-1702(4).
Willful and Malicious Misappropriation
Keymon next contends that the trial court erred in finding that she acted willfully and
maliciously in misappropriating Hamilton-Ryker’s trade secrets, the finding that supports the
trial court’s award of exemplary damages under Tennessee Code Annotated § 47-25-1704(b).
Keymon argues that “willful and malicious” in the Trade Secrets Act should be interpreted
to include an element of “hatred, ill will or spite,” similar to the “malice” standard for an
award of punitive damages. She also maintains that the record is devoid of evidence showing
that she acted with ill will, hatred or spite.
As noted above, Tennessee Code Annotated § 47-25-1704(b) provides for an award
of exemplary damages in the event that “willful and malicious misappropriation exists.”
T.C.A. § 47-25-1704(b) (2001). The Trade Secrets Act does not include a statutory
definition of “willful and malicious.” See T.C.A. § 47-25-1702 (2001) (“Definitions”).
Neither party cites a Tennessee case interpreting the phrase “willful and malicious” in the
context of the Trade Secrets Act, and we have found none.
In the absence of any Tennessee cases interpreting the Trade Secrets Act on this point,
Keymon cites Prime Co. v. Wilkinson & Snowden, Inc., No. W2003-00696-COA-R3-CV,
2004 WL 2218574 (Tenn. Ct. App. Sept. 30, 2004). In Prime Co., the Court held that the
proper definition of “malice” in a procurement of breach of contract case is “wilful violation
of a known right.” See id. at *4 (citing Crye-Leike Realtors, Inc. v. WDM, Inc., No.
02A01-9711-CH-00287, 1998 WL 651623, at *6 (Tenn. Ct. App. Sept. 24, 1998)). The
Court referred to the definition of “malice” applicable to an award of punitive damages,
namely: “hatred, ill will or spite.” Id. From this, Keymon submits that “willful and
malicious” as used in the Trade Secrets Act with respect to an award of exemplary damages
should be interpreted to include “hatred, ill will or spite.”
In response, Hamilton-Ryker points to case law from other jurisdictions interpreting
the “exemplary damages” provision in the Uniform Trade Secrets Act. These cases
differentiate “exemplary damages” in the Uniform Act from traditional punitive damages.
See Yeti by Molly, Ltd. v. Deckers Outdoor Corp., 259 F.3d 1101, 1111-12 (9th Cir. 2001)
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(“We conclude that the Montana legislature did not incorporate the definition of punitive
damages into the trade secrets act.”); Zawels v. Edutronics, Inc., 520 N.W.2d 520, 523-524
(Minn. Ct. App. 1994); McFarland v. Brier, 769 A.2d 605, 611-612 (R.I. 2001). While not
binding on this Court, the interpretation given to a provision of a uniform act by other
jurisdictions is highly persuasive. See Dewitt v. Al-Haddad, No. 89-394-II, 1990 WL 50727,
at *4 (Tenn. Ct. App. Apr. 25, 1990) (quoting Holiday Inns, Inc. v. Olsen, 692 S.W.2d 850,
853 (Tenn. 1985) (“While opinions by courts of sister states construing a uniform act are not
binding upon this court, we are mindful that the objective of uniformity cannot be achieved
by ignoring utterances of other jurisdictions.”). Moreover, the legislature has stated
expressly that the Act should be construed “to effectuate its general purpose to make
consistent the law . . . among states enacting it.” T.C.A. § 47-25-1709 (2001). We are
persuaded by these cases that the standard for exemplary damages under the Trade Secrets
Act should be interpreted differently from the traditional standard for punitive damages so
as not to require a finding of “hatred, ill will or spite.”
Here, the evidence shows that the day after Keymon’s last day of work for Hamilton-
Ryker, she contacted Hoing for the express purpose of soliciting the Verizon work.
Immediately after that, she emailed herself Hamilton-Ryker’s trade secret information on the
Verizon account. Clearly, this was to enable Keymon to step in and immediately begin
performing for Verizon the same services that Hamilton-Ryker had been providing. The trial
court brushed aside Keymon’s assertion that she emailed the information to herself in order
to assist Hamilton-Ryker in getting invoices to Verizon, finding her argument to be “without
merit.” This is fully supported by the evidence in the record. Thus, while drawing
unemployment compensation and accepting severance payments, Keymon was surreptitiously
utilizing Hamilton-Ryker’s trade secret information to purloin Verizon’s telephone directory
business, even utilizing Hamilton-Ryker employees to do so. We must conclude that this
conduct amounts to willful and malicious misappropriation under the Trade Secrets Act.
Thus, the trial court did not err in awarding exemplary damages pursuant to Tennessee Code
Annotated § 47-25-1704(b).
Damage Calculation
Keymon contends that the trial court erred in calculating Hamilton-Ryker’s damages.
To determine Hamilton-Ryker’s damages for Keymon’s violation of the Trade Secrets Act,
the trial court applied Hamilton-Ryker’s 32.9% profit calculation to the entire $1,450,388
that Keymon actually billed Oasis and Verizon from July 2004 to the date of the trial. First,
Keymon argues that it is too speculative to conclude that Hamilton-Ryker would have
provided services to Oasis and Verizon during this nearly four year time period from
Keymon’s layoff to the date of trial. Next, Keymon argues that neither Gallimore, who
testified as to Hamilton-Ryker’s lost profits, nor Keymon, who calculated the 32.9% average
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profit margin for Hamilton-Ryker’s work for Verizon, were qualified as experts in business
profit and loss analysis. Finally, Keymon asserts that the actual damage calculation of
$477,178 for violation of the Trades Secrets Act is inconsistent with the actual damage
calculation of $94,307 for inducement to breach the contract between Hamilton-Ryker and
Oasis and Verizon.
As noted above, Tennessee’s Trade Secrets Act authorizes the trial court to make an
award of damages that includes both the plaintiff’s “actual loss caused by misappropriation”
and the defendant’s “unjust enrichment caused by misappropriation that is not taken into
account in computing actual loss.” T.C.A. § 47-25-1704(a) (2001). In other words, the trial
court may, in its discretion, award the monies actually lost by the plaintiff because of the
defendant’s misappropriation; however, if the amount of the defendant’s unjust enrichment
is greater than the amount of the plaintiff’s actual loss, the damage award may be increased
up to the amount of the defendant’s unjust enrichment.
Here, the trial court utilized the total amount that Keymon had billed Hoing and Oasis
for her work on the Verizon telephone directories. It then applied the profit percentage
Keymon calculated for Hamilton-Ryker’s Verizon work. Regardless of whether Hamilton-
Ryker would have continued doing Verizon’s directory processing work during the nearly
four-year time span from Keymon’s layoff, this was a reasonable method to calculate the
amount by which Keymon was unjustly enriched for the Verizon work she obtained by virtue
of the trade secret information she misappropriated from Hamilton-Ryker. The award as
calculated by the trial court did not require the use of expert testimony, and is in no way
inconsistent with the calculation of Hamilton-Ryker’s actual damages for Keymon’s
inducement of Oasis and Verizon to breach the contract with Hamilton-Ryker. We find that
the trial court’s calculation of damages under the Trade Secrets Act is fully supported by the
evidence in the record.
Denial of Motion to Set Aside Judgment
Keymon argues that the trial court erred in denying her Rule 60.02 motion to set aside
the final judgment without allowing her additional time to conduct discovery.
Denial of a Rule 60.02 motion to set aside judgment is reviewed under an abuse of
discretion standard. Banks v. Dement Constr. Co., Inc., 817 S.W.2d 16, 18 (Tenn. 1991).
Keymon’s 60.02 motion was predicated upon a purported agreement between Adams and
Hamilton-Ryker, under which Adams’ favorable testimony was exchanged for Hamilton-
Ryker’s promise not to sue. In support of the motion, Keymon included an affidavit from
James Bowles stating that Adams had informed Bowles of the purported agreement. The
trial court denied the motion, finding that the affidavit contained inadmissible hearsay and
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that the evidence supported the final judgment even if Adams’ testimony were stricken.
Furthermore, three years elapsed between the filing of the complaint and the trial date, and
Keymon had ample time pending the trial to conduct discovery into this matter. We must
conclude that the trial court did not abuse its discretion in denying Keymon’s Rule 60.02
motion to set aside the judgment.
C ONCLUSION
In sum, we hold that Keymon’s noncompete covenant was reasonable and enforceable
even without a geographic limitation. We find that the Verizon-related information
misappropriated by Keymon constituted a trade secret, and that the evidence supports the trial
court’s finding that her misappropriation was willful and malicious. We affirm the trial
court’s award of damages, and exemplary damages, under the Trade Secrets Acts. We affirm
the trial court’s denial of Keymon’s Rule 60.02 motion. These holdings pretermit all other
issues raised on appeal.
The decision of the trial court is affirmed. The costs of this appeal are taxed to the
Appellant Tammy L. Keymon, and her surety, for which execution may issue if necessary.
_________________________________
HOLLY M. KIRBY, JUDGE
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