Staff Builders Home Healthcare, Inc. v. Whitlock
Court of Appeals Division II
State of Washington
Opinion Information Sheet
Docket Number: 26426-9-II
Title of Case: Staff Builders Home Healthcare etal, Respondents
v.
Dean A. Whitlock etux etal, Appellants
File Date: 10/26/2001
SOURCE OF APPEAL
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Appeal from Superior Court of Thurston County
Docket No: 98-2-00909-5
Judgment or order under review
Date filed: 08/18/2000
Judge signing: Hon. Paula K. Casey
JUDGES
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Authored by Carroll C. Bridgewater
Concurring: David H. Armstrong
COUNSEL OF RECORD
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Counsel for Appellant(s)
Thomas L. Meyer
Meyer Law Office
Us Bank Building
402 Capitol Way S Ste 12
Olympia, WA 98501-1096
Counsel for Respondent(s)
Mark M. Hough
Riddell Williams P S
1001 4th Ave Plaza Ste 45
Seattle, WA 98154-1065
IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON
DIVISION II
STAFF BUILDERS HOME HEALTHCARE, No. 26426-9-II
INC., a Delaware corporation;
COORDINATED HEALTHCARE, INC., a
Washington corporation,
Respondents/Cross-
Appellants,
v.
DEAN A. WHITLOCK and JANE DOE PUBLISHED OPINION
WHITLOCK, husband and wife, and
their marital community; LLOYD
ROYAL AND BETTY ROYAL, husband
and wife, and their marital
community; AFFORDABLE HOME
HEALTH OF WASHINGTON, INC., a
Washington corporation,
Appellants/Cross-
Respondents.
BEVERLY IGAZ and JOHN DOE IGAZ,
husband and wife, and their
marital community,
Defendants.
BRIDGEWATER, J.--Staff Builders (a home healthcare provider) sued Dean
Whitlock (a former employee) for breaching a noncompetition agreement and
violating the Uniform Trade Secrets Act by providing services to a client
of Staff Builders. We hold that Staff Builders was entitled to recover
their lost profits for damages and recoupment of unjust enrichment; but
Staff Builders was not entitled to recover Whitlock's salary because it
would have paid that money as wages in any event. We also affirm the award
of attorney fees in the trial court and on appeal. We affirm in part and
reverse in part.1
FACTS
Dean Whitlock was employed by Staff Builders Home Healthcare, Inc. and
Coordinated Healthcare Alliance, Inc., a franchise of Staff Builders.2 As
Staff Builders' employee, he provided home healthcare to Lloyd and Betty
Royal. Whitlock did not know the Royals before he started working for
Staff Builders. In January 1998, while still caring for the Royals as
Staff Builders' employee, Whitlock formed a corporation, Affordable Home
Health of Washington, Inc. (Affordable). Affordable's purpose was to
provide home healthcare services, much like Staff Builders. Whitlock
listed himself as Affordable's sole shareholder and director.
On March 1, 1998, Whitlock terminated his employment with Staff Builders
and immediately began providing his services directly to the Royals. The
Royals ended their relationship with Staff Builders that same day.
Whitlock provided care to the Royals at a rate 25% less than Staff
Builders.
On March 9, 1998, Staff Builders sent Whitlock a letter, demanding
that he stop working for the Royals. A week later, Whitlock amended
Affordable's articles of incorporation to show
that the company's shares belonged to his sister, Beverly Igaz.3 Whitlock
explained the reason for this transfer: '{I}t was my impression that it was
{Affordable} that was being hired {by the Royals} and not an individual.
And therefore, I ceased to be the owner of the company.' Report of
Proceedings (RP) at 48.
Staff Builders sued Whitlock and Affordable for tortious interference
with business expectancy, violation of a noncompetition/confidentiality
agreement, and violation of the Uniform Trade Secrets Act (UTSA) (chapter
19.108 RCW). The agreement, signed by Whitlock, provided that if he left
Staff Builders, he would not seek work with any of its clients.
During the bench trial, Richard Block, the sole proprietor of Coordinated
Healthcare, testified that losing the Royals as clients resulted in a loss
of $4,000 to $4,500 in profits, given the length of the Royals' lives, the
services provided, and Staff Builders' profit margin.
Affordable billed the Royals $38,780. It paid out $34,768 in salaries,
including $23,000 to Whitlock. No other evidence of Affordable's business
expenses was presented. Affordable therefore received approximately $4,000
in profit ($38,780 - $34,768 = $4,012).
The trial court found that the 'existence of the Royals as clients of Staff
Builders and as potential purchasers of home health care . . . were
Proprietary Materials and were covered by' the employment agreement
Whitlock signed. Clerk's Papers (CP) at 59. In addition, the trial court
found that there was no means by which Whitlock would have discovered that
the Royals needed home care services except through his employment with
Staff Builders. It further found that Whitlock breached the terms of his
employment agreement (by failing to maintain the secrecy of the information
about the Royals) and that Whitlock and Affordable violated the UTSA (by
using the information about the Royals for their own personal benefit).
The trial court awarded the following damages to Staff Builders:
$4,500 against Affordable ('for damages and recoupment of unjust
enrichment pursuant to {the UTSA}')
$22,500 against Whitlock (his unjust enrichment)4
$10,000 in attorney fees
There are two issues in this case. First, does the measure of damages
include the recovery of the wages ($22,500) paid to Whitlock, as unjust
enrichment, in addition to the lost profits ($4,500)? And second, was the
attorney fees award appropriate? This court reviews a trial court's award
of damages for abuse of discretion. Krivanek v. Fibreboard Corp., 72 Wn.
App. 632, 636, 865 P.2d 527 (1993), review denied, 124 Wn.2d 1005 (1994).
A trial court 'abuses its discretion when its exercise of discretion is
manifestly unreasonable or based on untenable grounds.' Palmer v. Jensen,
81 Wn. App. 148, 151, 913 P.2d 413 (1996) (citing Allard v. First
Interstate Bank, N.A., 112 Wn.2d 145, 148, 768 P.2d 998, modified, 773 P.2d
420 (1989)).
I. Unjust Enrichment
The UTSA allows a plaintiff to recover damages 'for the actual loss caused
by misappropriation' and 'for the unjust enrichment caused by
misappropriation that is not taken into account in computing damages for
actual loss.' RCW 19.108.030(1). Under the UTSA, the trial court awarded
Staff Builders $4,500 for 'damages and recoupment of unjust enrichment'
against Affordable and $22,500 for 'unjust enrichment' against Whitlock.
Whitlock does not contest the judgment against Affordable for $4,500.
Whitlock does contend that awarding his wages as 'unjust enrichment' allows
Staff Builders to recoup what would otherwise be a business expense,
thereby unjustly enriching Staff Builders. In effect, Whitlock argues that
Staff Builders should only receive the 'net profits' of his
misappropriation.
We agree:
(1) Had Whitlock not breached his contract or violated the UTSA, Staff
Builders would have continued to pay an employee to care for the Royals
(the employee most likely being Whitlock);
(2) Staff Builders testified that their damages were 'lost profits' in the
amount of $4,500; there was no testimony of any other or further damages.
To determine its lost profits, Staff Builders first calculated its overhead
and expenses. This calculation included the caretakers' salaries. Hence,
caretaker salaries were taken into account in 'computing damages for actual
loss.' RCW 19.108.030(1). There is no evidentiary basis upon which the
trial court could have determined any damages apart from actual loss.
Nowogroski Ins. v. Rucker, 88 Wn. App. 350, 360, 944 P.2d 1093 (1997). The
trial court erred and this portion of the judgment is reversed.
II. Attorney Fees
Under the UTSA, a court may award reasonable attorney fees to a prevailing
plaintiff if willful and malicious misappropriation exists. RCW
19.108.040. The trial court found, as a matter of law, that Whitlock's
actions were 'willful and malicious.' CP at 60. We review questions of
law de novo. Ed Nowogroski Ins., Inc. v. Rucker, 137 Wn.2d 427, 436-37,
971 P.2d 936 (1999).
Whitlock claims that the trial court erred by awarding attorney fees to
Staff Builders. He argues that there was no basis for the trial court's
finding of malice. But the record contains substantial evidence supporting
the trial court's finding that his actions were willful and malicious.
This evidence includes: (1) Whitlock met the Royals through working for
Staff Builders; (2) he formed a corporation to provide services similar to
those he provided as a Staff Builders' employee; (3) after he received a
cease and desist letter from Staff Builders, he transferred his corporation
from his name to his sister's name; and (4) he transferred the corporation
back to his name after the 90-day period for imposing liquidated damages
against the Royals had expired. The attorney fees award under RCW
19.108.040 is affirmed and Staff Builders is entitled to attorney fees on
appeal.
Affirmed in part, reversed in part.
Bridgewater, J.
We concur:
Armstrong, C.J.
Quinn-Brintnall, J.
1 Both parties raised an issue concerning the joint and several liability
of Whitlock in a liquidated damages award against the Royals, Staff
Builders' former clients. Staff Builders sued the Royals for their breach
of contract; a judgment was entered that was joint and several against the
Royals and Whitlock. This issue is moot because Staff Builders settled
with the Royals and that cause of action is concluded with Whitlock
receiving credit against that part of the judgment only that was joint and
several with the Royals.
2 Staff Builders and Coordinated Healthcare are hereinafter collectively
referred to as 'Staff Builders.'
3 Igaz's only activity on behalf of Affordable was to sign its annual
report. According to Whitlock, Igaz 'performed no services and received no
pay of any kind.' RP at 61.
4 The trial court arrived at $22,500 by adding Whitlock's wages and
Affordable's profits and then subtracting Staff Builders' lost profits
($23,000 + $4,000 - $4,500 = $22,500).
