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HA&W Capital Partners, LLC v. Bhandari

Court of Appeals of Georgia, Fifth Division

June 27, 2018

HA&W CAPITAL PARTNERS, LLC et al.
v.
BHANDARI et al.

          MCFADDEN, P. J., RAY and RICKMAN, JJ.

          MCFADDEN, PRESIDING JUDGE.

         This dispute arose when a group of registered representatives resigned from one financial services firm to join another. Central to this dispute is the interplay between their former employment agreements, which contained notice provisions limiting their ability to move from one firm to another, and the Protocol for Broker Recruiting, whose purpose is to facilitate such movement and to which both financial services firms had been signatories. That interplay is complicated by the fact that the former employer was undertaking to withdraw from the protocol as the registered representatives were undertaking to change firms. The central issue before us today is whether the protocol invalidates provisions in those employment agreements requiring the registered representatives to give advance notice of their resignations.

         This appeal challenges trial court orders granting and denying various cross motions for summary judgment on the parties' respective claims and counterclaims. Because the unambiguous language of the protocol does not invalidate the notice provisions at issue, the trial court erred in finding otherwise. So we reverse the grant of summary judgment that had disposed of the appellant former employer's breach of contract claim on the basis of that erroneous finding. The court's other summary judgment rulings premised on that erroneous finding require further consideration below, so we vacate those rulings and remand with direction.

         Also before us are attorney fee counterclaims. We reverse the denial of summary judgment to the appellant former employer on the appellee registered representatives counterclaim for attorney fees under OCGA § 13-6-11 because such fees are not recoverable for compulsory counterclaims. But, there are genuine issues of material fact as to the appellees' counterclaims for attorney fees under a contractual provision, so we affirm the trial court's denial of summary judgment to the appellant former employer on that counterclaim. Likewise, because there are genuine issues of material fact as to the counterclaims for wrongful injunctive relief, deferred compensation, and conversion, we affirm the trial court's denial of summary judgment to the appellant former employer on those counterclaims.

         1. Facts and procedural posture.

         Summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, 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, we review the grant or denial of summary judgment de novo, construing the evidence and all inferences in a light most favorable to the nonmoving party." Seki v. Groupon, Inc., 333 Ga.App. 319 (775 S.E.2d 776) (2015) (citation omitted).

         So construed, the evidence shows that Niraj Bhandari, David Austin, Lisa Schiffer, and Christopher Wynne entered into employment agreements with HA&W Capital Partners, LLC. HA&W Capital is a holding company whose operating subsidiaries include HA&W Wealth Management, LLC, an investment advisory firm. Pursuant to the employment agreements, Bhandari, Austin, Schiffer, and Wynne worked as registered representatives with HA&W Wealth, providing financial advice to clients.

         The employment agreements contained notice provisions regarding an employee's voluntary termination of his or her employment. The notice provisions in Austin, Schiffer, and Wynne's respective contracts stated that each of them "shall have the right to voluntarily terminate [his or her] employment for any reason, at any time, upon ninety (90) days prior written notice to [HA&W Capital]." Bhandari's contract contained virtually the same provision, except that it provided for 60 days notice instead of 90 days.

         On March 26, 2017 HA&W Capital transmitted a letter withdrawing from the Protocol, effective April, 5, 2014. HA&W Capital subsequently undertook to make that withdrawal retroactive.

         On April 4, 2014, Bhandari, Austin, Schiffer, and Wynne all terminated their employment with HA&W Capital without providing written notice and immediately commenced employment at Morgan Stanley Smith Barney, LLC (hereinafter "Morgan Stanley"). That same day, HA&W Capital filed a complaint and obtained an ex parte temporary restraining order preventing Bhandari, Austin, Schiffer, and Wynne from contacting any clients of HA&W Capital, from accessing any information system of HA&W Capital, and from destroying documents or electronically stored information relating to HA&W Capital's business. Five days later, on April 9, 2014, the trial court entered an order dissolving the temporary restraining order.

         HA&W Capital amended the complaint, adding HA&W Wealth and other affiliated companies as plaintiffs (collectively, "HA&W"), and adding Morgan Stanley and Dorothy Stanton, another former HA&W Wealth employee, as defendants. The amended complaint included a claim for breach of contract against Bhandari, Austin, Schiffer, and Wynne (collectively, "the former employees") for violating the notice of termination provisions of their respective employment agreements. The defendants jointly filed an answer and counterclaims. The former employees' first counterclaim was for breach of contract based on allegations that HA&W had breached the Protocol for Broker Recruiting, an agreement between various investment firms.

         The parties filed cross motions for summary judgment. After a hearing, the trial court entered three separate summary judgment orders. Its first order is entitled "Order on Cross-Motions for Partial Summary Judgment - Advance Notice Provisions and the Protocol for Broker Recruiting." In that order the trial court ruled on the former employees' motion for summary judgment on HA&W's breach of contract claim that the former employees had violated the notice provisions in their employment agreements; the former employees' motion for summary judgment on their counterclaim that HA&W had breached the protocol; HA&W's motion for summary judgment on its claim that the former employees had breached the notice provisions; and HA&W's motion for summary judgment on the counterclaim that HA&W had breached the protocol.

         In that order, the trial court stated that "the operative question in these [four] motions is whether the [p]rotocol applies and precludes [the former employees'] liability as to the advance notice provisions." The trial court then analyzed and rejected HA&W's various arguments as to why the protocol should not apply. The trial court then found as a matter of law that the protocol precludes any liability based on the notice of termination provisions in the employment contracts. Based on its finding that the protocol precludes liability under the notice provisions, the trial court granted summary judgment in favor of the former employees on HA&W's breach of contract claim; granted summary judgment in favor of the former employees on their breach of the protocol counterclaim; denied summary judgment to HA&W on its breach of contract claim; and denied summary judgment to HA&W on the breach of the protocol counterclaim.

         In its other two orders, the trial court ruled on the parties' summary judgment motions concerning other claims and counterclaims. Among other rulings, the trial court denied summary judgment to HA&W on the former employees' counterclaims for wrongful injunctive relief, deferred compensation, conversion, and attorney fees. HA&W appeals.

         2. First summary judgment order: protocol and notice issues.

         In its first enumeration of error, HA&W has included the four summary judgment rulings set forth in the trial court's first order and refers to these four rulings collectively as the "Protocol Orders." In the same way that the trial court did not separately analyze the four motions for summary judgment before it, and instead premised all four of its rulings on those motions on the same "operative" finding regarding the applicability and effect of the protocol, HA&W has not set forth separate arguments challenging each ruling, and instead has relied on the same arguments to challenge the rulings collectively.

         But the trial court's analysis regarding the protocol precluding the notice provisions was flawed: the protocol does not categorically invalidate notice provisions in employment agreements. So each of the rulings must be analyzed separately. In doing so, we reverse the grant of summary judgment to the former employees on HA&W's breach of contract claim. The other three rulings in the first order - the denial of summary judgment to HA&W on its breach of contract claim, the denial of summary judgment to HA&W on the former employees' breach of contract counterclaim, and the grant of summary judgment to the former employees on their breach of contract counterclaim - must all be vacated and remanded for further consideration.

         (a) Summary judgment to former employees on breach of contract claim.

         HA&W contends that the trial court erred in granting summary judgment in favor of the former employees and against HA&W on its breach of contract claim that the former employees had violated the notice provisions of their employment agreements. We agree.

         In its order, the trial court recited the contract provisions for each of the former employees requiring either 60 or 90 days prior written notice of termination, and the court further found that "[t]here is no dispute that Defendants Bhandari, Austin, Schiffer, and Wynne . . . all voluntarily terminated their employment with HA&W Capital on April 4, 2014, without providing any prior written notice to HA&W Capital[.]" Nevertheless, the trial court concluded that the former employees were entitled to summary judgment on the breach of contract claim on the ground that the protocol, to which HA&W Wealth and Morgan Stanley were signatories, [1] precluded any liability as to the notice provisions. That conclusion was erroneous.

         "The Protocol for Broker Recruiting is an agreement among [a number of] firms in the securities industry." Credit Suisse Securities (USA) LLC v. Tracy, 812 F.3d 249, 252 n. 8 (2d Cir. 2016) (punctuation omitted). It provides:

The principal goal of the following protocol is to further the clients' interests of privacy and freedom of choice in connection with the movement of their Registered Representatives ("RRs") between firms. If departing RRs and their new firm follow this protocol, neither the departing ¶ nor the firm that he or she joins would have any monetary or other liability to the firm that the ¶ left by reason of the ¶ taking the information identified below or the solicitation of the clients serviced by the ¶ at his or her prior firm, provided, however, that this protocol does not bar or otherwise affect the ability of the prior firm to bring an action ...

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