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Churchill v. Chevrolet

February 4, 2005

DAVID CHURCHILL, PLAINTIFF(S),
v.
WINTER CHEVROLET, ET AL., DEFENDANT(S).



The opinion of the court was delivered by: Joseph C. Spero United States Magistrate Judge

AMENDED ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT [Docket No. 68]

I. INTRODUCTION*fn1

Plaintiff's Motion For Partial Summary Judgment (the "Motion") came on for hearing on Friday,

January 21, 2005, at 9:30 a.m. For the reasons stated below, the Motion is GRANTED in part and DENIED in part.

II. BACKGROUND

A. Facts*fn2

1. Employment Relationship Between Churchill and Winter Chevrolet

David Churchill was employed as General Manager for Winter Chevrolet from March 2000 to July 7, 2003. Joint Statement, No. 13. Prior to commencing his employment, on February 28, 2000, Churchill entered into an employment agreement with Rose Winter, who is the President and Owner of Winter Chevrolet, entitled "General Manager Pay Plan." Counterclaimants Winter Chevrolet Company, Inc. and Rose Winter's Separate Statement of Undisputed Facts and Genuine Issues of Fact in Opposition to Counterdefendant David Churchill's Motion for Partial Summary Judgment ("Defendants' Separate Statement"), No. 1 (citing Winter Dep. 21:15-25; 27: 22-24; Payne Dep., Ex. 8); Plaintiff's Response to Defendants' Separate Statement of Undisputed Facts and Genuine Issues of Fact in Support of Their Opposition to Plaintiff's Motion for Partial Summary Judgment ("Plaintiff's Response to Defendants' Separate Statement") at 1 (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement).

In December 2001, Churchill began negotiations with Winter Chevrolet's accountant, Don Payne, for a new employment agreement ("the Employment Agreement"). Defendants' Separate Statement, No. 2 (citing Churchill Dep. 144: 3-5); Plaintiff's Response to Defendants' Separate Statement at 1 (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement). This new agreement was executed by Churchill, Winter and Winter Chevrolet Business Manager Lenore Nelson on March 12, 2003. Defendants' Separate Statement, No. 6 (citing Churchill Dep. 242: 12-15, Ex. 1); Plaintiff's Response to Defendants' Separate Statement at 1 (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement). By its terms, the agreement was to have retroactive effect as of January 1, 2002. Declaration of Richard M. Rogers in Support of Motion for Partial Summary Judgment ("Rogers Decl."), Ex. 3, Payne Dep., Ex. 1.

The Employment Agreement contains the following provision enumerating Churchill's duties and obligations:

Employee's Position and Duties

Employee shall be employed as Corporation's General Manager, at 2101 Railroad Avenue, Pittsburg, CA, or at such other place or places as from time to time designated by the Board of Directors of Corporation. Employee shall devote his full time, energy and abilities to the proper and efficient performance of the duties of his employment, Without prior express authority of Corporation's Board of Directors, Employee shall not, directly or indirectly during the term of his agreement: a) render services of a business or commercial nature to any other person or firm, whether for compensation or otherwise; or b) engage in any activity competitive with or adverse to Corporation's business or welfare, whether alone, as a partner, or as an officer, director, employee or shareholder of more than ten percent of the stock of any other corporation; provided, however, that should employee perform services, to any other person or firm for compensation, all such compensation shall be paid over to Corporation by Employee. From and after January 1, 2003, if Employee is terminated for any reason thereafter, for five (5) years following his termination as an Employee, Employee agrees that he will not, directly or indirectly, own an interest in, operate, join, control or participate in, or be connected as an officer, employee, agent, independent contractor, partner, shareholder or principal of any corporation, partnership, proprietorship, firm, association, person or other entity competing with Corporation's products or Corporation's business within fifty (50) miles from the Corporation's principal place of business. During such five (5) year period following termination as an Employee of Corporation, Employee agrees not to undertake any employment or activity competitive with Corporation's business in which the loyal and complete fulfillment of the duties of the competitive employment or activity would call on Employee to reveal, to make judgments on, or otherwise to use any confidential business information or trade secrets of Corporation's business to which Employee had access by reason of Corporation's business.

Id., ¶ 3.

2. Pittsburg Ford Negotiations

During the fall of 2002, Winter entered into negotiations to purchase another car dealership, Pittsburg Ford. Joint Statement, No. 14. As General Manager, Churchill worked closely with Winter during these negotiations and attended meetings between Winter and representatives of Pittsburg Ford. Joint Statement, Nos. 14-16. Churchill viewed a number of confidential documents relating to the potential purchase, including the Pittsburg Ford Lease, the Purchase Agreement to buy Pittsburg Ford, an environmental report on Pittsburg Ford, and Operating Reports for Pittsburg Ford. Joint Statement, Nos. 18-21. On the advice of both Churchill and Winter's accountant, Don Payne, Winter signed an agreement to purchase Pittsburg Ford containing a number of contingencies. Joint Statement, No. 23 (initially, Churchill advised Winter to purchase Pittsburg Ford); Defendants' Separate Statement, No. 8 (Payne advised Winter that he thought Pittsburg Ford could be "quite profitable"); Plaintiff's Response to Separate Statement (stipulating that, with the exception of Nos. 11, 12, 18, 25, 37, and 38, Plaintiff does not object to facts contained in Defendants' Separate Statement).

On November 15, 2002, Winter invoked a contingency that revoked the purchase of Pittsburg Ford. Joint Statement, No, 25. The letter sent on behalf of Winter to the seller of Pittsburg Ford listed as material deficiencies the financial condition of Pittsburg Ford, the general condition of the facility -- including potential environmental problems with the site -- and concerns about pending litigation against Pittsburg Ford. Declaration of Joshua J. Cliffe in Opposition to Counterdefendant David Churchill's Motion for Partial Summary Judgment ("Cliffe Decl."), Ex. A, Winter Dep., Ex. 34. According to Defendants, though, the "key" factor in Winter's decision to revoke the agreement to purchase Pittsburg Ford was advice from Churchill that she should back out of the deal.

In support of their position, Defendants cite a declaration by Winter and to Winter's deposition testimony. In the Declaration, Winter states as follows:

7. After I agreed to purchase Pittsburg Ford, it became obvious to me that David's enthusiasm for the deal was diminishing, We both had a number of concerns about Pittsburg Ford, including problems outlined in an environmental report, the condition of the facility and pending litigation, but I believed these problems could be overcome and we could make it a profitable dealership. I thought David thought so too, but I perceived a growing amount of hesitation on his part, so I asked him bluntly whether we should proceed with the transaction. David said, "We have a lot on our table right now. You know, we're building those two buildings. Why don't you just tell that I don't want to go ahead with the deal."

8. I relied upon David a great deal as General Manager and it was important to me that he was on board if we were going to go forward with the purchase. When David advised me to revoke the purchase agreement, I felt that I had no choice but to cancel the purchase agreement. I certainly had concerns about Pittsburg Ford, but David's advice to revoke the purchase agreement was the key factor that led to my decision to cancel the agreement.

Declaration of Rose Winter ("Winter Decl.").

In her deposition, Winter testified as follows:

Q: . . . At some point, November 15, 2002, you decided you didn't want to go ahead with the deal, right?

A: That's correct.

Q: Why was that?

A: There were various reasons. One had to do with the report that we received from the -- the environmental report. There was also some litigation that was pending. There were -- the facility was in disrepair. David visited a couple of times. I visited once. I believe he visited once with me and then with the service manager. So there were a lot of concerns. . . .

Q: . . . The concerns that you raised that you just testified to, were they the real reasons you didn't go ahead with the deal?

A: Yes.

Q: Okay.

A: That plus the fact that David said, "Why don't you just tell them that I don't want to manage all those stores," he said.

Q: How did that come up?

A: Well, because we were saying, "Well, do we go ahead with this or do we not?" And at some point he said, "We have a lot on our table right now. You know, we're building those two buildings," which we defintely were. But at some point he in fact said, "Why don't you just tell them that I don't want to go ahead with the deal."

So I said, I'm not going to say that." I said, I will say, you know, there are some conditions that are not the best conditions, and based on those facts we ...


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