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Yash Solutions, LLC v. New York Global Consultants Corp.

Court of Appeals of Georgia, Third Division

October 4, 2019


          DILLARD, P. J., GOBEIL and HODGES, JJ.

          Dillard, Presiding Judge.

         Yash Solutions, LLC appeals the trial court's partial grant of summary judgment to New York Global Consultants Corporation ("NYG") as to its breach-of-contract claim, as well as the denial of its breach-of-contract counterclaim-all related to non-compete and payment clauses. Yash also maintains that, at the subsequent jury trial, the jury erred in awarding attorney fees to NYG for bad faith and stubborn litigiousness, and the trial court erred in denying its motion for a new trial. For the reasons set forth infra, we affirm.[1]

          Viewing the summary-judgment evidence in the light most favorable to Yash (i.e., the nonmovant) and the evidence presented at trial in the light most favorable to the jury's verdict, [2] the record shows that NYG was formed in 2007 to provide information-technology consulting, software development, and project-management services. Similarly, Yash is an IT consulting and business-solutions firm, "providing business consulting and staffing solutions to its [c]lients through the placement of consultants and professionals." Particularly relevant here, Yash and NYG both recruit and screen IT consultants to place with other companies. To that end, on January 31, 2013, NYG and Yash entered a Master Supplier Agreement ("MSA"), under which NYG agreed to provide its own IT consultants to Yash, and Yash agreed to facilitate placements for those consultants with its clients. Under Article V of the MSA, when Yash successfully makes such a placement, NYG is required to submit an invoice to Yash within 45 days, but Yash has no obligation to pay the invoice until it first receives payment from its client for the consultant. Yash made its profits by billing clients at a 25 percent markup above the amount it paid NYG.

          Additionally, the parties executed addendums governing NYG and Yash's arrangement for placing consultants with specific Yash clients, including one named EMC.[3] The EMC addendum's provisions regarding Yash's payment of NYG's invoices are substantially similar to those set forth in the MSA. But the EMC addendum specifically requires Yash to pay the amount due on an NYG invoice within five days of receiving payment from EMC-i.e., the "pay-when-paid" provision. The MSA also includes a non-compete clause (detailed infra), which essentially prohibits NYG from rendering the same or similar services that Yash provides under the MSA to its clients that are the subject of an addendum to the MSA. This prohibition applies during the term of the MSA and for one year following its termination.

         During the term of the MSA, Yash placed two NYG consultants-Vikram Rathi and Benedict Pinto-with EMC for various projects between March 2013 and February 2015. Initially, Yash paid NYG within five days of receiving payments from EMC in compliance with the MSA. But in October 2014, things changed. One of Rathi's placements concluded, and Yash was informed that it could find him a new placement with EMC. Rathi declined this EMC placement, stating that "he did not want or he would find some reason not to accept that particular offer." And shortly thereafter, Sumit Bagga-Yash's operations manager-contacted Rathi's accountant and discovered that he had already been placed with EMC for a new project. Then, on November 14, 2014, Rathi sent Bagga a message using an EMC email account, notifying Bagga that he was "working on a different project" and Bagga should contact NYG with any questions.

         On December 30, 2014, after learning of Rathi's new EMC placement, Yash's attorney sent a letter to NYG, alleging that NYG had breached the MSA's non-compete clause by placing Rathi directly with EMC, rather than through Yash. The letter further instructed NYG to terminate Rathi's "unauthorized placement" with EMC and cease any and all discussions with EMC about providing it with additional resources.

         At first, Bagga thought Rathi's placement was the only one that violated the MSA, and as a result, Yash continued placing other NYG consultants in compliance with the terms of the agreement. But when Yash did not receive a response to its December 2014 letter, it refused to pay an invoice from NYG for Yash's prior placement of Rathi with EMC for a project that occurred in August 2014. Yash declined to pay this invoice, even though it had already received payment from EMC for that placement.

         Then, in January 2015, Pinto-another NYG consultant who had been placed on EMC projects by Yash-was nearing the end of his contract for one of those placements, and he sent an email to Mukesh Molugu-the president of NYG-and Yash, giving them two weeks' notice that he would be leaving the project. According to Molugu, Pinto told NYG that he did not want to work for Yash anymore due to phone calls that he was receiving from Bagga. But according to Bagga, Pinto informed Yash that NYG was pressuring him to leave the project and was not paying him properly. Nevertheless, Pinto submitted the necessary paperwork for Yash to place him with another company. And it was only sometime later that Yash discovered it could not place Pinto with that company because of the particular skills required. Then, after that "situation went south[, ]" Pinto told Yash that direct placements through NYG were available to him. At this point, Bagga decided to investigate NYG's placements of its consultants because he now knew that "there was much more than just one [direct] placement going on." So, on February 16, 2015, Yash's attorney sent a second letter to NYG, addressing NYG's direct placement of Pinto with EMC and demanding "strict compliance" with the MSA. Specifically, Yash contended that, under the non-compete clause, NYG was unauthorized to place Pinto directly with EMC, and in any event, NYG must notify Yash if that situation occurred.

         Although Yash notified NYG that Pinto's recent placement violated the MSA, it did not inform NYG that it would no longer pay its invoices for any other pending placements. Nevertheless, Yash ceased paying NYG's invoices for prior placements of Rathi and Pinto on EMC projects, even though EMC paid Yash for those placements. According to Bagga, Yash did not pay those invoices because NYG circumvented Yash in placing Rathi and Pinto directly with EMC. And unaware of Yash's apparent belief that it was now exempt from complying with the MSA's pay-when-paid provision, NYG representatives made phone calls and sent emails to Yash, inquiring as to why its invoices were not being paid. Yash ignored those entreaties and went radio silent.

         On March 10, 2015, after Yash refused to discuss its nonpayment of certain invoices, NYG filed a complaint, asserting two breach-of-contract claims based on Yash's failure to comply with the MSA's pay-when-paid provision and requesting expenses of litigation, including attorney fees. Yash filed an answer, asserting several affirmative defenses, as well as a breach-of-contract counterclaim based on NYG's alleged breach of the MSA's non-compete clause.[4] Following discovery, NYG filed a motion for summary judgment as to all of its claims and Yash's counterclaim. Yash responded, filing a cross-motion for partial summary judgment as to its breach-of-contract counterclaim.

         Ultimately, on March 7, 2018, the trial court entered an order on the parties' cross-motions for summary judgment. First, the court granted summary judgment to NYG on its breach-of-contract claims, finding that nothing in the MSA, including the non-compete provision, excused Yash from its obligation to pay NYG's invoices for placements that had already occurred and for which Yash had been paid. But the court denied NYG's claim for expenses of litigation and attorney fees under OCGA § 13-6-11, finding that there were genuine issues of material fact as to whether Yash acted in bad faith. Next, the court denied NYG's claim for summary judgment as to Yash's counterclaim, in which it alleged that NYG breached the non-compete restrictive covenant, finding that the claim was sufficiently pleaded to survive summary judgment. But the court also found that there were jury issues as to whether the MSA's non-compete clause was enforceable. Additionally, the court determined that, even if it was enforceable, a jury must also decide whether Yash's actions amounted to a waiver of the non-compete provision.

         Thereafter, the parties proceeded to a jury trial as to the claims that survived summary judgment, and ultimately, the jury entered a verdict in favor of NYG. Specifically, the jury found that, as to EMC, Yash waived NYG's compliance with the MSA's non-compete provision and that NYG was entitled to $83, 146.20 in attorney fees because Yash acted in bad faith, was stubbornly litigious, or caused unnecessary trouble and expense. Yash now appeals both the summary-judgment order and the jury verdict.

         1. The Jury Trial.[5]

         Yash challenges the jury's determination that it waived enforcement of the MSA's non-compete provision, as well as the jury's award of attorney fees to NYG.[6] We will address each of these claims in turn.

          When a jury returns a verdict, the verdict must be affirmed on appeal if "there is any evidence to support it, and the evidence is to be construed in a light most favorable to the prevailing party with every presumption and inference in favor of sustaining the verdict."[7] And we review a denial of a motion for a new trial "according to this same standard."[8] Therefore, a jury verdict, "after approval by the trial court, and the judgment thereon will not be disturbed on appeal if supported by any evidence, in the absence of any material error of law."[9] With this standard of review in mind, we turn to Yash's specific claims of error.

         (a) Yash first contends that the jury's finding it waived enforcement of the non-compete provision in the MSA was unsupported by the evidence. We disagree.

         Throughout this litigation, Yash essentially argued that NYG violated the non-compete clause in the MSA by placing its consultants directly with EMC instead of doing so exclusively through Yash, as required under the terms of the MSA. In relevant part, Article X (A) of the MSA provides:

Noncompetition. [NYG] agrees that during the term of this Agreement, and for a period of 1-year following termination of this Agreement, regardless of the reason, [NYG] will neither directly nor indirectly (i) provide services that are the same or similar to those services provided under this Agreement or any Statement of Work for any client or clients that [NYG] has specifically executed any Addendum to provide services to said client or clients; (ii) communicate with those clients for the purpose of providing services, unless authorized to do so in writing by YASH; and (iii) induce, solicit or accept work from those specific clients. If [NYG] discovers that it has either unintentionally violated any of those restrictions or that any client or clients that have contacted [NYG] directly for the purposes of providing same or similar services [NYG] provided under this agreement, [NYG] will immediately notify YASH of this contact and refrain from any further contact with YASH'S client and decline to provide any services to the client.[10]

         According to Yash, because NYG executed an addendum specifically governing Yash's placement of NYG consultants with EMC, NYG breached this non-compete provision by placing Pinto and Rathi directly with EMC, instead of through Yash. Yash further contends that this alleged breach exempted it from complying with the pay-when-paid provision of the MSA-i.e. paying NYG's invoices within five days of receiving payment from EMC-as to those consultants.

         At the summary-judgment stage, as to Yash's breach-of-contract counterclaim, the trial court concluded that there were genuine issues of material fact regarding whether the non-compete provision was enforceable, and if so, whether Yash waived enforcement of the provision by "continuing to operate under the MSA" after learning of the direct placements. As a result, those issues proceeded to trial, and ultimately, the jury found that "by a preponderance of the evidence[, ] . . . [Yash] waived [NYG's] compliance with the [non-compete clause] in the [MSA] with [NYG]."

         As we have previously explained, waiver of a contract provision may be "express, or may be inferred from actions, conduct, or a course of dealing."[11] Put another way, waiver of a contract right may "result from a party's conduct showing his election between two inconsistent rights."[12] Specifically, acting on the theory that the contract is still in force, "as by continuing performance, demanding or urging further performance, or permitting the other party to perform and accepting or retaining benefits under the contract, may constitute waiver of a breach."[13]Nevertheless, all of the attendant facts, taken together, must "amount to an intentional relinquishment of a known right, in order that a waiver may exist."[14] But significantly, when the evidence is in conflict, "the issue of waiver must be decided by the jury."[15]

         Here, Yash presented evidence that-after it first discovered the direct placements in November 2014-its attorney sent two letters to NYG (one in December 2014 and the other in February 2015), asserting that NYG breached the MSA's non-compete provision and demanding strict performance with the terms of the agreement. And while the letters demonstrated its intent to enforce the non-compete provision, Yash never pursued the contractual remedies available for it to do so. Indeed, as discussed in Division 2 (b) infra, the MSA expressly provides that, if NYG breached the non-compete provision, Yash was entitled to pursue any remedy in law or in equity, including injunctive relief. But Yash never sought injunctive relief or sued NYG for damages.

         Instead, Yash continued performing under the MSA and encouraging NYG to do the same for quite some time after learning of its alleged breach. Indeed, even after Yash's attorney sent the aforementioned letters to NYG, Yash continued sending emails to NYG, asking it to submit candidates to Yash for placement. And at trial, Yash's president admitted that, at least as of September 2016, two years after learning of NYG's direct placements of Rathi and Pinto with EMC, "[Yash] continue[d] to promote placements [for] which [NYG] consultants are eligible to submit as a resource." Significantly, when explaining why it continued to seek NYG consultants for new placements, Yash's president testified that the MSA had never been terminated. Additionally, NYG's president (Molugu) testified that Yash was still seeking to place its consultants at the time of trial in April 2018, several years after discovering NYG's alleged breach of the non-compete provision in 2014. Simply put, the foregoing actions by Yash, including its express admission at trial that it believed the MSA was still in force, are evidence that supports the jury's verdict as to waiver.[16]

         The jury was presented with conflicting evidence, then, regarding waiver. On the one hand, the two letters Yash sent to NYG shortly after it discovered the direct placements evinced its intent to enforce the non-compete provision. But there was also significant evidence of Yash's conduct spanning years after it sent those letters from which the jury could infer that it intended to continue operating under the MSA and accept its benefits.[17] And because there was conflicting evidence regarding whether Yash intended to waive enforcement of the non-compete provision, [18] the question of waiver was for the jury, and not this Court, to decide.[19]

          Nevertheless, Yash argues that the jury's verdict must be reversed because the MSA contains a "no-waiver" provision. Specifically, Article XIII (K) of the MSA provides that "[t]he failure of a party to enforce the provisions of this Agreement will not be a waiver of a provision or right of such party thereafter to enforce each and every provision of this Agreement." But Yash concedes that, under Georgia law, a no-waiver or anti-waiver provision in a contract may itself be waived.[20] And here, the trial court instructed the jury regarding the no-waiver provision, [21] and the jury obviously concluded that Yash's conduct of continuing to operate under the MSA's terms and encouraging NYG to do the same for years after discovering the alleged breach was significant enough to constitute a waiver of that provision as well.[22] Simply put, because there is some evidence to support the jury's verdict as to waiver, it must be affirmed.[23]

         (b) Yash next argues that there was a "dearth of evidence" to support the jury's award of attorney fees under OCGA § 13-6-11. This claim likewise lacks merit.

         In Georgia, expenses of litigation and attorney fees may be awarded, under OCGA § 13-6-11, if "the fact-finder determines the defendant has acted in bad faith, has been stubbornly litigious, or has caused the plaintiff unnecessary trouble and expense."[24] And questions concerning bad faith, stubborn litigiousness, and unnecessary trouble and expense under OCGA § 13-6-11 are "generally questions for the jury to decide."[25] Indeed, an award of ...

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