GREENWAY, INC. v. JEFFREY H. LYNN
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RENDERED: JULY 23, 2004; 10:00 a.m.
NOT TO BE PUBLISHED
C ommonwealth O f K entucky
C ourt O f A ppeals
NO.
2003-CA-001815-MR
GREENWAY, INC.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE F. KENNETH CONLIFFE, JUDGE
ACTION NO. 02-CI-007056
v.
JEFFREY H. LYNN
APPELLEE
OPINION
AFFIRMING IN PART, REVERSING IN PART, AND REMANDING
** ** ** ** **
BEFORE:
BARBER, KNOPF, AND TACKETT, JUDGES.
KNOPF, JUDGE:
Greenway, Inc., appeals from orders of the
Jefferson Circuit Court, entered July 30, 2003, denying its
claim for breach-of-contract damages against Jeffrey Lynn, a
former employee, and awarding Lynn attorney fees.
Greenway
contends that both rulings resulted from misconstructions of
Lynn’s employment contract.
We agree with Greenway that Lynn is
not entitled to attorney fees and so must reverse in part and
remand.
The parties do not dispute the relevant facts.
Greenway, which is headquartered in Louisville, designs and
installs commercial and residential irrigation systems.
hired Lynn in 1992 as a laborer.
It
By 1999 Lynn had become one of
the company’s more experienced and valuable workers, so late
that year, when the company learned that Lynn was considering a
competitor’s job offer, it countered by offering to promote him
to a supervisory position and to increase his compensation.
Lynn accepted Greenway’s offer.
In December 1999, the parties
executed a written employment contract whereby, in addition to
his base salary and other bonuses, Lynn received a signing bonus
of $7,500.00.
In March 2001, following a heated exchange between
Lynn and his manager, Paul Parker, Lynn resigned his position,
thus terminating the contract.
He was immediately rehired,
however, apparently at the same salary but without the incentive
bonuses provided for in the contract or its other terms.
Lynn
remained employed under this arrangement until August 2002, when
he left Greenway and began working for Performance Irrigation,
LLC, a company Lynn formed with a friend.
This company is also
in the business of installing irrigation systems.
Thereupon, in September 2002, Greenway brought suit
against Lynn.
It alleged that he was violating the 1999
contract’s non-competition and non-solicitation clauses and that
2
his March 2001 resignation had breached a contract requirement
that he give a ninety-day notice prior to resigning.
Greenway
sought injunctive relief barring Lynn from working for a
competitor and from soliciting Greenway’s customers.
It also
sought the return of Lynn’s $7,500.00 signing bonus, the remedy
specified in the contract for breach of the ninety-day-notice
requirement.
In December 2003, Lynn filed a counter-claim
seeking a declaration that he had not violated the contract’s
non-competition clause.
Ultimately, the trial court ordered Lynn not to
solicit Greenway’s customers for the duration of the noncompetition period (Lynn agreed to this order), but otherwise
denied Greenway’s claims.
It also awarded attorney fees to both
parties, Greenway for prevailing on the solicitation issue and
Lynn for prevailing on the employment issue.
When these awards
were offset, Lynn’s net award came to about $6,800.00.
It is
from this award of attorney fees to Lynn and from the denial of
its claim for the return of Lynn’s signing bonus that Greenway
has appealed.
The trial court ruled both that Greenway had waived
its right to demand the return of Lynn’s signing bonus by
waiting nearly eighteen months to assert the right and that
enforcement of the signing-bonus-return clause would be
inequitable.
Greenway contends that the trial court erred by
3
failing to give effect to paragraph 7.2 of the contract, which
provides that, notwithstanding any delay in asserting its
contract rights, the employer will not be “subjected to the
defense of waiver or estoppel.”
We need not address the questions of Greenway’s waiver
and the effect of paragraph 7.2, however, because we agree with
the trial court that the signing-bonus-return clause is
otherwise unenforceable.
Contracts, of course, may provide for
liquidated damages in the case of breach, but “terms fixing
unreasonably large liquidated damages are unenforceable as
against public policy.”1
The contract’s forfeiture of Lynn’s
entire $7,500.00 signing bonus merely for his failure to give
the requisite notice of his resignation, at least in the absence
of any allegation that Lynn’s unplanned departure caused
significant damages, is exactly the sort of unreasonable penalty
provision public policy does not allow.
The trial court did not
err, therefore, by refusing to enforce it.
We agree with Greenway, however, that Lynn is not
entitled to recover his attorney fees.
As the parties note, the
rule in Kentucky is that, absent a statutory or contractual
provision to the contrary, each party is responsible for his own
1
Man O War Restaurants, Inc. v. Martin, Ky., 932 S.W.2d 366, 368
(1996).
4
attorney fees.2
Lynn maintained, and the trial court agreed,
that he is entitled to fees under the contract’s paragraph 7.5:
In the event it is necessary for a party to
utilize Court proceedings in order to
enforce any of the terms and conditions of
this Agreement, and said Court finally
determines that the defending party violated
any of the terms and conditions of this
Agreement, the defending party agrees to pay
to the prevailing party any and all of its
court costs and reasonable attorneys’ fees.
This clause is clearly meant to limit the recovery of
fees to a prevailing plaintiff.
Although, as the California
courts have noted,3 such one-sided attorney-fee clauses are apt
to operate oppressively, we have been referred to no Kentucky
authority, like the statutory authority in California, requiring
that such clauses not be enforced as written.
Lynn argues,
however, that his counter-claim seeking declaratory relief made
him a plaintiff and thus brought him within the contract’s
terms.
We are compelled to disagree.
As Greenway notes, Lynn’s counter-claim merely
restated his answer to Greenway’s complaint.
issue, either factual or legal.
It raised no new
Such redundant counter-claims
are improper, for once the complaint is resolved the redundant
2
Holsclaw v. Stephens, Ky., 507 S.W.2d 462 (1973).
3
M. Perez Company, Inc. v. Base Camp Condominiums Association
No. One, 3 Cal. Rptr. 563 (2003).
5
counter-claim becomes moot.4
With few exceptions not applicable
here, a court does not have jurisdiction to address moot claims.5
Thus, Lynn did not prevail as a plaintiff, only as a defendant,
and, as noted, the contract does not provide for a prevailing
defendant’s attorney fees.
The award of fees to Lynn,
therefore, was erroneous.
Accordingly, we reverse the July 30, 2003, order of
the Jefferson Circuit Court awarding attorney fees to Lynn and
remand for entry of a suitably modified order.
In all other
respects, we affirm the circuit court’s July 30, 2003, orders.
ALL CONCUR.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
John R. Shelton
Sales, Tillman, Wallbaum,
Catlett & Satterley, PLLC
Louisville, Kentucky
Cornelius E. Coryell, II
Wyatt, Tarrant & Combs, LLP
Louisville, Kentucky
4
Aldens, Inc. v. Packel, 524 F.2d 38 (3rd Cir. 1975)
(considering the federal equivalent of CR 13.01); Mille Lacs
Band of Chippewa Indians v. Minnesota, 152 F.R.D. 580 (1993).
5
Commonwealth v. Hughes, Ky., 873 S.W.2d 828 (1994).
6
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