Venture Express, Inc. v. Zilly

Full title: VENTURE EXPRESS, INC., Plaintiff/Appellee, v. Michael E. ZILLY, Ind.…

Court: Court of Appeals of Tennessee. Western Section, at Nashville

Date published: Jul 27, 1998

Facts

Zilly began working as a driver for Venture Express in 1981. After a series of promotions, Zilly was named president of Venture Express in 1990. Sometime in 1995, however, Venture Express’s owner, Jimmy Allen, became dissatisfied with Zilly’s job performance. In July 1995, Allen met with Zilly to discuss improving his job performance. At the meeting’s conclusion, Allen informed Zilly that he would reevaluate Zilly’s performance within thirty days.

One Sunday in August 1995, Allen read in the newspaper that Zilly had formed a new corporation named Zilly Transportation Services, Inc. According to Allen, when confronted, Zilly admitted that he planned to go into business for himself in about six months. Zilly, on the other hand, maintained that he never intended to leave Venture Express and that he only filed the corporate charter for Zilly Transportation Services because he feared he would be terminated from Venture Express. In any event, Allen immediately terminated Zilly upon learning of the newly formed corporation.

While president of Venture Express, Zilly was responsible for maintaining a relationship with Venture Express’s various customers and for ensuring that they remained satisfied with Venture Express’s services. Zilly’s responsibilities included a customer named Calsonic Yorozu Corporation. At the time of Zilly’s termination, Venture Express was completing the second year of a three-year contract with Calsonic. The contract established a rate for the three-year term of the contract and automatically renewed each year but could be terminated if either party provided thirty days’ written notice.

Within days of his termination, Zilly began soliciting Calsonic’s business on behalf of his new corporation, Zilly Transportation Services. Zilly knew the rate being charged Calsonic by Venture Express, and he submitted a bid that quoted a more favorable rate. Zilly and Calsonic subsequently entered into a contract, effective October 2, 1995, for Zilly to service a portion of the business formerly handled by Venture Express. Venture Express would have earned between $78,000 and $87,000 in profits for these services had it completed the remaining year of its contract with Calsonic.

Venture Express subsequently brought this action against Zilly, Zilly Transportation Services, Inc., and Zilly Transportation Services, LLC, contending, inter alia, that Zilly breached his fiduciary duty as an officer of Venture Express by forming Zilly Transportation Services and by obtaining a contract with Calsonic to perform a portion of the services formerly provided by Venture Express. After conducting a bench trial, the trial court ruled that Zilly had breached his fiduciary duty to Venture Express, and the court entered a judgment for $78,000 in favor of Venture Express. This appeal followed.

Issue

Decision

Applying the foregoing factors to the evidence introduced at trial, we conclude that Venture Express’s customer rates did not constitute confidential information. Venture Express’s owner, Jimmy Allen, testified that he considered Venture Express’s customer rates to be confidential information and that he did not permit Venture Express’s officers and employees to reveal its rates to competitors. On cross-examination, however, Allen acknowledged that Venture Express had approximately eighty owner-operators who were independent contractors, not employees of Venture Express. These independent owner-operators either knew or could ascertain the customer rates for their respective moves because their pay amounts were based on specified percentages of the customer rates. Harry Woods, the president of Tanksley Transfer, a subsidiary of Venture Express, corroborated this testimony. Woods testified that, if they wanted to, the owner-operators could calculate the applicable customer rates for their moves from the information contained on their pay stubs. The pay stubs indicated the owner-operators’ pay amounts and the applicable percentages of the customer rates which these amounts represented. Moreover, Jimmy Allen testified that the customers themselves were not prohibited by contract or otherwise from revealing the rates they were charged by Venture Express, and he acknowledged that at least one customer had revealed competitors’ rates to him in the past.

The foregoing evidence demonstrates that at least eighty non-employees of Venture Express either knew or could readily ascertain the respective rates charged to Venture Express’s customers. Although Venture Express prohibited its officers and employees from revealing customer rates, it imposed no similar prohibition on either its customers or its independent owner-operators. In fact, before trial, one of Venture Express’s customers, Huntco Steel, Inc., faxed material to Zilly which contained rates charged by its various carriers, including Venture Express. Under these circumstances, we hold that Venture Express’s customer rates did not constitute confidential information and, thus, that Zilly’s use of this information to obtain Calsonic’s business did not result in a breach of his fiduciary duty as a former corporate officer of Venture Express.

The trial court’s judgment is hereby reversed, and this cause is dismissed. Costs of this appeal are taxed to Venture Express, for which execution may be issued if necessary.

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *

three + 10 =