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Vernon v. Assurance Forensic Accounting, LLC

Court of Appeals of Georgia

June 30, 2015

VERNON
v.
ASSURANCE FORENSIC ACCOUNTING, LLC; and vice versa

Reconsideration denied July 23, 2015 -- Cert. applied for.

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Employment contract. Fulton Superior Court. Before Judge Brasher.

Krevolin & Horst, Jeffrey D. Horst, A. Jarrod Jenkins, Christopher E. Adams, for appellant.

Merolla & Gold, A. Todd Merolla, for appellee.

BARNES, Presiding Judge. Ray and McMillian, JJ., concur.

OPINION

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Barnes, Presiding Judge.

These companion appeals arise out of a dispute over severance pay. Mark Vernon sued his former employer, Assurance Forensic Accounting, LLC, (" Assurance" or the " company" ) for breach of contract and other claims, seeking unpaid commissions allegedly owed under a severance agreement. Following discovery, the trial court granted Assurance's motion for summary judgment on Vernon's claims for breach of contract, money

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had and received, fraud, violations of the Georgia Racketeer Influenced and Corrupt Organizations Act (" Georgia RICO" ), and equitable accounting. Vernon appeals these rulings in Case No. A15A0306. The trial court denied Assurance's motion for summary judgment on Vernon's claims for promissory estoppel and unjust enrichment, and Assurance cross-appeals these rulings in Case No. A15A0307.

For the reasons discussed below, in Case No. A15A0306, we reverse the trial court's grant of summary judgment to Assurance on Vernon's claim for breach of contract. We affirm the trial court's grant of summary judgment to Assurance on Vernon's claims for money had and received, fraud, violations of Georgia RICO, and equitable accounting.[1] In Case No. A15A0307, we affirm the trial court's denial of summary judgment to Assurance on Vernon's claims for promissory estoppel and unjust enrichment.

[333 Ga.App. 378] Summary judgment is proper only if the pleadings and evidence " show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." OCGA § 9-11-56 (c). On appeal from a trial court's grant or denial of summary judgment, we " conduct a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party." Bank of North Ga. v. Windermere Dev., 316 Ga.App. 33, 34 (728 S.E.2d 714) (2012). So viewed, the record shows as follows.

The Original Compensation Agreement.

Assurance is a certified public accounting firm that specializes in forensic accounting. Dennis Neas and Chad Thompson formed Assurance as a limited liability company and are the sole members and managers of the company. Neas and Thompson were authorized to act on behalf of Assurance.

Vernon, a childhood friend of Neas, began working for Assurance as a salesperson shortly after its formation in 2004. Neas and Thompson reached an oral agreement with Vernon that in return for his sales and marketing work for Assurance, he would be paid a commission of 5 percent of Assurance's revenue received from approximately 20 specified clients[2] and 15 percent of the revenue received from all other clients (the " Original Compensation Agreement" or the " 5/15 percent rate" ). Although Vernon was entitled to commission at the 5/15 percent rate under the Original Compensation Agreement, he was hired on an " at-will" basis and thus could be terminated at any time.

The Amended Compensation Agreement.

Vernon worked under the Original Compensation Agreement for approximately two years. However, in late 2005, as Assurance grew more successful, Neas and Thompson informed Vernon that they wanted to renegotiate the Original Compensation Agreement to lower Vernon's commission rate. In response, Vernon went " on strike" and did not work for several months. In the spring of 2006, Vernon returned to work with the understanding that they " were going to be able to work something out," and the parties thereafter orally agreed to a revised compensation agreement (the " Amended Compensation Agreement" ).

The Amended Compensation Agreement was never reduced to writing, and the parties dispute its terms. According to Neas and Thompson, the parties agreed that Vernon would continue to be paid commission under the 5/15 percent rate on revenue actually received from clients until Assurance reached annual revenue over $3,000,000. Neas and Thompson asserted that the parties further agreed that [333 Ga.App. 379] once Assurance reached annual revenue over $3,000,000, the 5/15 percent rate would no longer apply, and Vernon's rate of commission would be subject to Assurance's discretion until the parties agreed on a new compensation agreement. Neas and Thompson claimed that the parties further agreed that in the event they could not reach a new agreement on compensation once annual revenue exceeded $3,000,000, Vernon would receive severance payments for 12 months under the " current compensation

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structure," meaning that his severance pay would be calculated under the 5/15 percent rate on revenue actually received from clients only up to the point when the company reached $3,000,000 in annual revenue, after which the severance pay rate would be subject to Assurance's discretion.

In contrast, Vernon testified that under the Amended Compensation Agreement, the parties agreed that he would continue to be paid commission under the existing 5/15 percent rate until his annual income reached $450,000 (i.e., 15 percent of $3,000,000) and he earned more than anyone else who worked on behalf of the company, whereupon his compensation would be renegotiated. Vernon also maintained that the parties agreed that if he was ever terminated for any reason, including a disagreement regarding his compensation, he " would receive a severance from Assurance ... at [his] current commission rate on all jobs received prior to and during the severance period of twelve months from the date of termination." According to Vernon, " it would be self-evident to anybody familiar with the industry" when a job assignment was " received" by an accounting firm. Specifically, Vernon maintained, it was understood that a job was " received" by Assurance when the assignment was entered into Assurance's business database or when Assurance otherwise acknowledged its receipt of the assignment through a communication with the client. Vernon also asserted that the parties agreed that his severance pay would be set at the 5/15 percent rate irrespective of Assurance's annual revenue.

The Sales Commission Proposal.

In June 2010, Vernon helped Assurance procure a significant amount of forensic accounting work in connection with the British Petroleum (" BP" ) oil spill in the Gulf of Mexico. Assurance's revenue grew to over $3,000,000 in 2010 as its work on the BP project increased, and Vernon was paid $460,532 in commissions.[3] However, Vernon did not earn as much as Thompson.

In early 2011, Thompson began developing a proposal for a new compensation structure for Vernon. On April 14, 2011, Neas e-mailed [333 Ga.App. 380] Vernon a proposal developed by Thompson that sought to change Vernon's 5/15 percent rate of commission (the " Sales Commission Proposal" ). The Sales Commission Proposal also included a section entitled " Termination" that stated in relevant part: " If this proposal is rejected, then [Vernon] will continue to be paid at the 15% rate for one year, as previously agreed. If during this one year period, another compensation plan is accepted, that plan will be implemented retroactively to the date ... of this proposal."

On April 20, 2011, Thompson e-mailed Vernon, noting that " [a]s indicated in our conversation this morning," discussions regarding the Sales Commission Proposal would be deferred for one month. Thompson then wrote, " We will not charge this time to your 1 year severance agreement."

On May 22, 2011, Vernon sent an e-mail to Thompson to which he attached a lengthy letter rejecting the rate structure set forth in the Sales Commission Proposal and explaining his reasons for the rejection. Vernon copied Neas on the e-mail with the attached letter. In the letter, Vernon wrote, " Let me make myself perfectly clear about these negotiations. I will not accept a change in any of our agreements as long as I am not earning as much as you are earning from Assurance[.] I have been just as instrumental as you have towards this company's success."

Vernon also discussed in his May 22 letter the " history" of the parties' negotiations over pay and noted that, " After a great deal of deliberation by the three of us, we came to an agreement that we would renegotiate my compensation if my commissions exceeded the amount of money that you could make from the company" and had " agreed to allow me the opportunity to make at least 15% on the first 3MM in revenue per year." Vernon further wrote that the parties had agreed that if Neas and Thompson " ever wanted to change [his] compensation, and if [he] chose not to accept the new terms," he would be

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entitled to severance pay from Assurance at his " current commission rate on all jobs received prior to and during the severance period of 12 months from the date of termination."

Later that day, Neas sent an e-mail to Vernon that terminated his employment with Assurance. Neas wrote that he was " sorry things cannot be worked out" but that " we intend to honor our agreement of 1 year severance, starting today." Thompson sent a similar e-mail to Vernon that same day stating that " [s]ince we are unable to reach an ...


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