                                                                                              04/06/2018
                IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                 August 23, 2017 Session

                 GREAT AMERICAN OPPORTUNITIES, INC. v.
                        BRAD PATTERSON, ET AL.

                Appeal from the Chancery Court for Davidson County
                  No. 11-1419-IV   Russell T. Perkins, Chancellor


                              No. M2016-02034-COA-R3-CV



This is a breach of contract action in which the plaintiff employer filed suit against its
employee, claiming that he was liable for balances on his commission and sales accounts
and for breach of loyalty pursuant to the terms of the employment agreement. Following
a bench trial, the court ruled in favor of the employee and ordered the employer to direct
the redemption of his stock held in the parent company. We reverse, in part, and hold
that the parent company is not obligated to redeem the stock and that the employer is
entitled to $15,000 in damages for unearned compensation as a result of the employee’s
breach of loyalty. The court’s judgment is affirmed in all other respects. We remand for
the collection of attorney fees and costs.1

      Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
               Reversed in Part, Affirmed in Part; Case Remanded

JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which D. MICHAEL
SWINEY, C.J. and ANDY D. BENNETT, J., joined.

Paul S. Davidson, Laura P. Merritt and William Randall O’Bryan, Jr., Nashville,
Tennessee, for the appellant, Great American Opportunities, Inc.

Brad Patterson, Hixson, Tennessee, pro se.




1
  The case under submission presents similar issues addressed by this court in Great American v.
Brigman, No. M2016-02035-COA-R3-CV, which we decided in a separate opinion after denying motions
for consolidation on appeal.
                                          OPINION

                              I.      BACKGROUND

       Great American Opportunities, Inc. (“GAO”), founded in 1974, provides services
and products to promote fundraising activities for schools and civic organizations. GAO
is a subsidiary of Southwestern/Great American, Inc. (“Southwestern”), a separate legal
entity and a Tennessee corporation. GAO employs commissioned sales representatives
who work with individuals within participating schools and organizations to promote
fundraising efforts. Brad Patterson (“Employee”) worked for GAO as a sales
representative from February 2003 through June 16, 2011.

        GAO claimed that it provided Employee with a contract entitling him to a
guaranteed draw plus earned commissions for his first two years of employment. GAO
asserted that upon the expiration of his initial two-year term, Employee would then be
entitled to an unguaranteed draw against earned commissions paid in accordance with a
yearly Pay Plan. Employee would also then be responsible for certain business expenses
maintained on an open account, referred to by the Parties as the “8000 account.”2
Further, Employee was also then liable for his balance on an open commission account
that documented cash advances provided in excess of his actual earned commissions –
referred to by the Parties as an overdraw.

       The contract at issue provided, in pertinent part, as follows:

       Compensation

       (a)    For all services rendered by Employee under this Agreement, [GAO]
       shall compensate him/her in accordance with the Compensation Schedule
       which is attached hereto as Exhibit A, and which shall be deemed for all
       purposes to be an integral part of this Agreement.

       (b)    Each fiscal year during the term of this Agreement, [GAO] shall
       cause to be executed in writing a new Compensation Schedule and Sales
       Representative’s Pay Plan, effective July 1 of the new corresponding year,
       indicating the amount of compensation and the method for payment of said
       compensation for the services of Employee during the following fiscal year
       beginning July 1st. The new Compensation Schedule shall be considered a
       part of this Agreement and shall be known as Exhibit A for the
       corresponding year. In conjunction with each new fiscal year, [GAO] will
2
  The 8000 account documented advances and business allowances made for merchandise, promotional
aids, marketing pieces, and mailings used for the promotion of fundraisers.
                                                    -2-
      advise Employee of his/her applicable Pay Plan to be set forth in a written
      Notification given in accordance herewith comparable in form to the
      Addendum made a part hereof.

                                         ***

      Modification and Waiver of Breach.         No waiver or modification of this
      Agreement shall be binding unless it is in writing, signed by the parties
      hereto. No waiver of a breach hereof shall be deemed to constitute a waiver
      of a further breach, whether of a similar or dissimilar nature.

                                      ***

      Entire Agreement. This Agreement constitutes the entire understanding
      between the parties with respect to the subject matter hereof, superseding
      all prior discussions, representations and preliminary agreements, whether
      written, oral or implied. This Agreement will not be amended or modified
      except in writing executed by the parties.

(Emphasis added.). A Notification of Pay Plan, dated February 14, 2003, was attached to
the contract and signed by the Parties. The document provided as follows:

                                      Exhibit A
                               Notification of Pay Plan

                                         ***

      Compensation in First Year

             Monthly Compensation: Employee will receive monthly
             compensation of $13,542 for the term [beginning February
             17, 2003, and ending February 16, 2004].

             Bonus Compensation Opportunity: For any business
             booked over the $300,000 net wholesale target outlines
             above, [GAO] will pay [Employee] a bonus of 10% of the
             excess net wholesale. The bonus will be accrued at the time
             the net wholesale is recorded on the books of the company
             and payable to [Employee] no later than 30 days after the end
             of the season in which the bonus compensation was accrued.

                                          -3-
      Compensation in Second Year
      In the event that [Employee’s] Employment Agreement is renewed for the
      year following the term of his Notification, [Employee] will continue to
      receive this monthly compensation. However, in that year, $2,500 of the
      monthly compensation will be considered salary. The remainder of the
      monthly compensation will be a guaranteed draw against commissions,
      bonuses and allowances earned. If aggregate commissions, bonuses and
      allowances earned as outlined below exceed the aggregate monthly
      compensation amounts, [GAO] will pay [Employee] excess amount. If,
      however, the amounts earned do not exceed aggregate monthly
      compensation amounts, the shortfall (overdraw) will NOT be due and
      payable to [GAO].

      For all lines of business except Magazines, [Employee] will [] earn
      commissions, bonuses and allowances according to the Company’s
      Experienced Pay Plan in effect at that time. For Magazines, [Employee]
      will earn commission of 25% of aggregate base wholesale. [Employee]
      will also earn a bonus of $1.00 for each subscription sold in excess of a
      base subscription amount to be determined at the time the Employee’s
      employment with [GAO] commences.

(Emphasis added.). The Pay Plans referenced in Exhibit A were not signed by the Parties
but were mailed to Employee. The Pay Plans contained the following general terms that
remained unchanged throughout Employee’s tenure with GAO:

      7.      Compensation And Draw. [Employee] will receive a monthly
      compensation, payable semi-monthly, a portion of which may be a base
      compensation with any remaining amount to serve as an advance or a
      “draw” against commissions and bonuses earned during the fiscal year as
      defined in the new hire and experienced sections of this pay plan. For each
      fiscal year, [Employee]’s applicable Notification of Pay Plan will also note
      his/her compensation and draw.

      8.     Adjustments To Compensation And Draw.          [GAO] may at its
      discretion adjust or discontinue [Employee’s] monthly compensation at any
      time if, in the opinion of [GAO] management, [Employee] has not
      performed at an acceptable level.

      9.    Draw In Excess of Commission. If at any time the draw paid to
      [Employee] exceeds commissions earned by more than the amount
      approved by management, [Employee] may not be paid any additional draw
                                          -4-
      until the excess amount is within approved limits. However, if such a draw
      is allowed, [GAO] may, at its option, recover the entire aggregate excess
      draw above commission and bonuses as, among other things, a debt on
      open account or offset such aggregate excess draw against bonuses,
      compensation and/or commissions, as the case may be.

                                         ***

      14.    [Employee’s] 8000 Account.         [GAO] will provide [Employee]
      monthly invoices and statements detailing charges to [Employee’s] account
      with [GAO] (the “8000 account”). All charges to [Employee’s] account
      will be reconciled and paid each month. [Employee] must notify Customer
      Service of billing errors within 60 days of receipt of the applicable monthly
      statement. Failure to do so constitutes acceptance of charges invoiced.

                                         ***

      17.     Year-End Settlement of Accounts.         All amounts due [GAO] at
      fiscal year-end may be withheld from bonuses and any other compensation
      amounts that would normally be paid to [Employee] by August 31
      following the close of that fiscal year. These amounts due include but are
      not limited to draws paid in excess of commission earned, advances in
      excess of expense allowance earned and charges made to [Employee’s]
      8000 account. If these compensation amounts due to [Employee] are not
      sufficient to cover amounts due to [GAO], the excess is due and payable . .
      . by August 31 following the end of the fiscal year. Or [GAO] may, at its
      option, offset such amounts as set forth in Paragraph 9.

       According to GAO, Employee was not responsible for his 8000 account or any
overdraw for his first two years of employment based upon his specific offer of
employment. Beginning in 2005, GAO provided Employee with invoices documenting
his 8000 account balance. Employee never reconciled his 8000 account as provided for
in the yearly Pay Plans; however, he made a payment of $14,000 on the account in June
2008. GAO also withheld some of his earnings, referred to as “C-Prize” money, in an
attempt to reconcile his account liability. Employee resigned on June 16, 2011, with an
outstanding balance of $149,497.67 on his commission account and $98,155.85 on his
8000 account.

       GAO filed suit for breach of the employment agreement and quantum meruit. As
pertinent to this appeal, GAO claimed that Employee was liable for the balance on the

                                          -5-
commission account and the 8000 account and that he had breached his duty of loyalty
and good faith by:

       (a)   filing false and fraudulent expense reports concerning work
       purportedly performed by [him], through his spouse, for [GAO];

       (b)    falsely representing to [GAO his] intention to remain with [GAO] in
       the Fall of 2011;

       (c)     contacting [GAO] customers, while still employed by [GAO], and
       soliciting the transfer of customers’ business to [him] or [his] new business
       venture.

GAO claimed that Employee was also liable for wrongful inducement to breach contract
by encouraging Shannon Coley, a fellow employee, to breach his contract and join him in
a business venture and for misrepresentation and/or fraud, for civil conspiracy by
working with Mr. Coley to solicit business.3 Lastly, GAO claimed that Employee was
jointly and severally liable for the wrongful acts of Mr. Coley. GAO sought a judgment
in the amount of $247,653.52, plus prejudgment interest, legal fees, and costs for the
balance remaining on the commission and 8000 accounts. GAO also requested damages
directly and proximately caused by the breach of Employee’s duty of loyalty. The parties
later entered into a stipulation prior to trial providing that the court “shall determine the
entitlement to, if any, as well as the amounts, of any awards of attorneys’ fees and costs.”

      Employee denied liability, claiming that he had been advised that he was not and
would never be held liable for any balance held on his commission and 8000 accounts.
He filed a counter-complaint, in which he asserted, inter alia, claims of fraudulent
inducement, negligent misrepresentation, fraud, unjust enrichment, and violations of the
Tennessee Consumer Protection Act and the Tennessee Securities Act of 1980. His
claims related to promises made to him upon his hiring and his participation in the
company stock program. He also requested an accounting to enable him to determine the
value of his stock investment. He later amended his counter-complaint to add
Southwestern as a counter-defendant.

       The case proceeded to trial in January 2015. James Ring testified that he left
Quality School Plans (“QSP”), a similar fundraising business, to start a magazine division


3
 GAO also filed suit against Mr. Coley, who is not a party to this appeal. GAO and Mr. Coley reached
an agreement following the entry of the court’s final order and sought an order of dismissal from this
court. We granted the request and dismissed the appeal as it pertained to Mr. Coley.

                                                 -6-
at GAO in 2002. 4 He recalled initially working with Rob Corley, Neil Arnold, Jean
Laise, and Kurt Gengenbach, all former QSP employees who joined GAO to develop the
magazine division. They referred to themselves as the “magazine team” but did not have
formal titles at the time. He stated that Employee and James Brigman were among the
first potential hires invited to interview in Nashville. He stated further,

        [A] typical day would have a potential candidate arrive first thing in the
        morning, we would pick them up at the airport, or if they drove, obviously,
        we did not have to do that. And we would have them taken on a tour of
        Southwestern facilities to see various companies within Southwestern to
        see how it operated, to learn a little bit about its history.

        Then I would take over and interview them to find out more about them and
        why they would even want to join us. Would talk about what they could
        expect if they joined us over their first two years and then on into the
        future.

        I would have [Mr. Corley] in marketing spend time with the candidate
        discussing our various programs, many on the magazine side that we didn’t
        even have at the time. So we had to tell him where we were going.

        We would have [Mr. Arnold] talk a little bit about operations and how this
        company functioned. I would ask [Ms. Laise] to talk to them about our
        benefit plans, because I’m from Canada. I just wasn’t familiar with that
        part of it.

        Then, later in the day, they would sit with Tom McDowell, the [P]resident
        of the company at the time. And Tom is a real, real people person, and he
        would spend at least an hour with these candidates. He would explain our
        stock plan to them and our profit sharing. That’s the part he always liked to
        talk about, the wealth accumulation piece.

                                                 ***

        And then I would get together with them and see how interested they were
        and make sure they understood our commission structure and so forth.




4
 Mr. Ring is currently the executive vice president and director of sales for QSP, Canada, which is now a
subsidiary of GAO.
                                                   -7-
       And then they would leave, and we might actually on the spot say, we
       would like to hire you, and you go home and think about it. We’ll get a
       contract put together and sent out.

He explained that GAO offered those leaving QSP to start the magazine division a 25
percent commission rate for magazine sales, a salary, and an automobile reimbursement
plan, referred to as the Runzheimer program.

       Mr. Ring identified the Employment Agreement at issue and discussed the specific
compensation schedule offered to Employee. He further noted that Employee was bound
by a duty of loyalty that required him to use his “best efforts” in promoting and soliciting
business for GAO. He recalled that Employee was responsible for a territory comprised
of certain parts of Northern Georgia and Southeastern Tennessee and that with the
exception of his first year of employment, Employee stayed within that territory.
Employee never advised him that the Pay Plans did not apply or that he was not receiving
payment in accordance with the Employment Agreement.

       Mr. Ring acknowledged that the compensation structure was unique because those
coming from QSP were precluded from selling in their previous territory for the first
year. The first year, salary was determined based upon prior sales averages with QSP.
The second year, representatives were still provided a salary “guarantee” because GAO
recognized that there was an adjustment period when the representative returned to his or
her previous territory. He explained that the representatives received the same amount of
money but that it was broken into two sections – a $30,000 salary and a sales-based
commission. He further acknowledged that the new hires were not responsible for
charges on the 8000 account for those first two years. He stated,

       After year two, it became part of the regular compensation system with
       salary, commissions, bonuses, et cetera. There was one exception, though,
       and I couldn’t tell you the exact years. For a few years in there, the
       magazine group that came over from [QSP] were getting the 25 percent,
       and there was a lower percentage paid to [the existing GAO
       representatives] who were just learning the business.5

Other than the commission “bonus”, the sales representatives in the magazine division
were paid as outlined in the Pay Plans provided to all employees. He identified the Pay
Plan allegedly applicable to Employee and acknowledged that the Pay Plan did not
indicate the amount of his compensation. He explained that the plans outlined the

5
 He asserted that the 25 percent commission rate was finally incorporated in the 2008/2009 Pay Plan and
applicable to all employees in the magazine division.
                                                   -8-
commission amounts applicable to each individual but did not contain a salary
component applicable to Employee.

       Mr. Ring described the 8000 account as follows:

       It is an account . . . where representatives can charge various items; for
       instance, maybe they purchase some samples, charge it to that account.
       They may want to take advantage of a system where they could have their
       brochure packets for a school. They could have a personalized parent letter
       inserted in each one. And if they wanted to do that, of course, there was a
       charge for it. They could put that against their 8000.

       Then on the other - - and there are other things as well. Then on the other
       side, any C prize money was credited to that account to bring it down.6

He believed the representatives were given monthly statements documenting his or her
8000 account balance. Representatives were permitted to question charges on the
account, and GAO rectified erroneous charges. He claimed that Employee was charged
with 8000 account expenses even during his first two years of employment. While
charged, the expenses were “written off” for Employee’s first two years of employment.

       Mr. Ring stated that an employee’s 8000 account balance was carried forward to
the next fiscal year if not reconciled. He noted that GAO often made a “business
judgment” based upon a particular representative’s profitability in determining whether
the amount could be carried forward or whether payment should be due in full. He
recalled that Thomas Belli, who was President of GAO, and Kevin Hawley, who was
Vice President of Sales, worked with representatives to reconcile his or her 8000 account
balance. Employee even provided a check in partial payment of his 8000 account
balance in June 2008. Employee did not indicate the money was not owed or that he was
paying the amount under protest.

       Mr. Ring stated that Employee was required to submit program agreements,
defined as the school’s agreement with the representative to run the fundraising program
through GAO. These agreements were essential and necessary for GAO to determine the
resources and staff needed to support the sales season and to determine a representative’s
advances against commission. There were two selling seasons for each school year,
namely Fall and Spring. He estimated that approximately 80 percent of a representative’s
business was completed in the Fall, with the rest occurring in the Spring. Accordingly,
6
 The C-prize program was a cash incentive program that allowed the sales representative to credit his or
her 8000 account in lieu of using the prize program provided by GAO. Employees could also receive
cash if his or her 8000 account was current.
                                                 -9-
representatives were encouraged to “work a season ahead.” He explained that schools
would sign program agreements with other companies if the representative failed to
secure agreements in a timely manner. He noted that Employee worked to re-sign his
Fall business in the months of January, February, and March.

        Relative to Ms. Laise, Mr. Ring claimed that she played an administrative role
after the initial recruitment process was completed. He denied ever hearing anyone refer
to her using a formal title. He acknowledged that he held the formal title of Executive
Vice President but claimed that he did not acquire said title until GAO purchased QSP,
Canada. He agreed that Ms. Laise received a salary of approximately $150,000 per year
in 2002 and that her pay increased to $165,000 per year in 2007 and to $173,250 in 2008.
She also participated in the stock program, beginning in 2008. He further agreed that her
direct supervisor was listed as Henry Bedford, the Chief Operating Officer at the time
who later became the Chief Executive Officer. He noted that himself and the other
members of the initial “magazine team” also reported to Mr. Bedford. He agreed that Mr.
Bedford identified Ms. Laise as a manager in an email, dated August 18, 2005. He later
asserted that he and others were given the title of Vice President for insurance purposes
because GAO provided an accidental death benefit based upon the level of his or other
position in the company. He surmised that Ms. Laise’s title was likely given in
accordance with the benefits package. He acknowledged that she was also a former
executive for QSP and that she was involved in the negotiations with GAO to hire QSP’s
former senior management team.

      Mr. Ring admitted that it was “possible” that Employee could have had calls or
meetings with Ms. Laise concerning his compensation. He stated,

      He could have because, as I testified earlier, she was mandated to get
      information from the candidates, their W-2s, their sales, and those kind of
      things, so that we could put together a compensation plan. But that would
      happen only after we had the full day together and determined if we wanted
      to go forward. We didn’t need to do that in advance of the meeting. But
      then she should. I’m sure she would.

He denied ever advising anyone that he or she would never be responsible for 8000
account expenses or an overdraw on the commission account or that his or her salary
would never decrease. As lead of the recruitment team, he never made such a promise to
any of the 50 people he hired. He acknowledged that he had not confirmed the absence
of such representations with Ms. Laise prior to deposition or trial because she no longer
worked for GAO.



                                          - 10 -
        Carol Costa testified that she has been employed by GAO as a compensation
manager for approximately 27 years. She reports to Timothy Underwood and manages a
staff of four people. She is “in charge of all of the pay for the salespeople and the payroll
for the administrative staff.” Her office also mails the 8000 account statements, which
are printed through the Great American Sales Information (“GASI”) website. The
customer service department, headed by Tracy Armstrong, is responsible for drafting the
8000 account statements, while her department is responsible for drafting the commission
account statements. The 8000 account and commission account statements are mailed on
a monthly basis.

        Ms. Costa testified that she is also responsible for administering the “part-timer
program.” She explained that some sales representatives were qualified to receive an
assistance allowance to pay someone to work for them. Assistants are paid by GAO in
accordance with an hourly rate as documented by the individual sales representative. She
stated that Employee received an assistance allowance of $6,000 for the 2009/2010 fiscal
year. She noted that in Spring 2011, Employee continued to submit time cards for his
spouse who served as an assistant even though he had exhausted his allowance for the
year. Employee normally used his assistant hours in the Fall because most business
occurred in the Fall. She questioned Employee, who claimed that his wife was already
working on things needed for the Fall season. His request was ultimately approved.

       Ms. Costa identified the Employment Agreement at issue and explained that
Employee received a two-year guaranteed salary and that he was not responsible for the
balance on his commission and 8000 accounts. She acknowledged that the 8000 account
arrangement was never evidenced in writing. She provided that after the initial two-year
term, he was paid in accordance with the yearly Pay Plans sent by her office.7 She
confirmed that Employee never received another Notification of Pay Plan and that the
yearly Pay Plans were not wholly applicable to him because he received a guaranteed
salary and a car allowance program, among other things, as employment incentives. She
recalled that the yearly Pay Plans were revised for the 2008/2009 fiscal year to reflect a
salary component for all representatives.

       Ms. Costa stated that Employee never indicated that the yearly Pay Plans did not
apply to him, that he was not paid in accordance with his agreement, or that he was not
responsible for the balances reflected on his statements.             She explained that
representatives were permitted to object to items listed on the 8000 account within 60
days of receipt of the statement and that any objections to the balance on the commission
account should be made within 10 days of receipt of the statement.

7
 She agreed that the yearly Pay Plans were not sent via certified mail and that the representatives were
not required to sign the plans, indicating assent to the terms.
                                                     - 11 -
      Ms. Costa testified that representatives, including Employee, worked with his or
her manager to calculate commission draws in accordance with a “12-pay” system,
meaning that their projected earnings were divided into 12 equal payments and paid on a
monthly basis each year. She explained,

      A 12-pay is a worksheet that the manager works up with the
      [representative], which it begins with what contracts they have in-house for
      the upcoming fiscal year. And they equate that into sales and then apply
      that to the commission rates and say – which tells a [representative] they’re
      going to earn so much for the next 12 months, and that money can be
      divided . . . from that amount into the upcoming 12 months.

Representatives were permitted to purchase prizes at the national meeting each year
through the bulk buy program, where items selected by the representatives were charged
to the 8000 account but reconciled through the 12-pay system. She explained,

      When we’re doing the 12-pay, there is a section of money before it is
      spread that goes against the bulk buy, whatever their bulk buy payment
      was, or if they want to take a certain amount of money up front, that is
      taken off of the 12-pay first and then the remaining amount is spread.

Representatives could requests advances for cash prizes, which are deducted from the 12-
pay before the remainder of the projected balance is spread into 12 equal payments.

        Ms. Costa identified one of Employee’s 12-pay worksheets, which reflected that
he was entitled to an annual draw of $105,000, less a bulk buy payment of $7,782 and
total cash advances of $16,000, leaving him with 12 equal monthly payments of $6,768
for the 2010/2011 fiscal year. She believed the bulk buy payment and cash advances
evidenced his payment of fundraising expenses. His cash advances were not taxed in
accordance with the accountable expense program. She explained,

      [The accountable expense program is] an approved program through the
      [Internal Revenue Service (“IRS”)] where we can allow our sales
      representatives to take nontaxed money during the year, and then they are
      responsible – they have to turn their receipts in to us. It’s their
      responsibility to turn their receipts in to [GAO], and then we’ll offset the
      nontaxed income with the amount of receipts they’ve turned in.

She provided that if Employee only provided $10,000 in receipts, then GAO would have
converted the remaining $6,000 into income and documented that amount on his W-2.

                                          - 12 -
       Ms. Costa acknowledged that Employee was not responsible for the cost of
fundraising for his first two years of employment with GAO. In 2004, he received an
advance of $50,000 for his fundraising efforts, while his bulk buy payment was $5,500.
She provided that these amounts were covered by GAO. Beginning in 2005, money
earned through the C-Prize program was applied internally to his 8000 account balance
and documented as payroll deductions. Employee’s commission draw was also reduced
on a number of occasions, beginning in July 2006. She stated that his commission draw
was reduced again by $2,000 per month in February 2009 and by an additional $200 per
month in August 2009 and that two additional reductions occurred in February 2010 and
January 2011. She provided that Employee did not object to these reductions.

       Relative to Ms. Laise, Ms. Costa confirmed that internal titles were sometimes
assigned for purposes of the life insurance program. She identified an internal document
that classified Ms. Laise as a vice president for insurance purposes. She identified a
different document that provided for Ms. Laise’s classification as a manager. She
explained that Ms. Laise did administrative work similar to her role. She admitted that
her salary was much less than $150,000 in 2002 and agreed that a $150,000 salary was
“more of an executive-type salary.”

       Tracy Armstrong testified that she has been employed by GAO as the director of
customer care for approximately 16 years. Her department is responsible for all customer
communications. She explained that GAO’s customers consist of its representatives,
those working with representatives to coordinate a fundraising program, and consumers
of products sold through the fundraising programs. Her department is also responsible
for administering the 8000 accounts. She stated,

      The 8000 account is an account for a sales representative. When they are
      hired with the company, we set them up an account that allows them to
      place orders and track their business through the system.

She explained that representatives purchase prizes and bulk buy items through the 8000
account. Her department is responsible for training representatives on the use of the 8000
account and the GASI website. Her office also fields questions from representatives
concerning his or her account. She provided that representatives are also directed to
review the business management guide available through the GASI website. The guide
addresses the use of the 8000 account. She confirmed that the business management
guide contains a provision providing for the acceptance of changes on the 8000 account if
not rejected within 60 days of the invoice date. She claimed that Employee never
objected to charges placed on his 8000 account.



                                          - 13 -
      Ms. Armstrong confirmed that Employee was not responsible for his 8000 account
balance for his first two years of employment. She identified one payment on his 8000
account in the amount of $14,000 in June 2008. She provided that his current balance
was $248,093.22, which included the transfer of his commission account balance.

       Shannon Coley testified that he provided part-time assistance for Employee,
beginning in 2002. He continued in the same part-time position when Employee left QSP
to start the magazine division at GAO. He was later hired by GAO as a sales
representative in September 2005. Unlike Employee, his employment agreement
specifically provided that he was responsible for any overdraw on his commission
account that occurred in his second year of employment.8 His agreement also provided
that his pay would be determined in accordance with the Pay Plans following the
expiration of an initial two-year term. He acknowledged receipt of an invoice
documenting charges on his 8000 account at some point in 2005 and agreed that money
he earned through the C-Prize program was applied to his account balance.

        Mr. Coley testified that he resigned on June 16, 2011. He provided that at the time
of his resignation, his earned commissions were not commensurate with his draw in
advance of commissions. He believed that his salary would continue to decrease if he
remained with GAO because of a new policy providing that his pay would be based upon
his sale of magazine subscriptions. He explained that he sold mostly cookie dough and
gift items in his territory because those in his territory could not afford to purchase the
magazine subscriptions. He was also discouraged by GAO’s new business practices,
namely representatives were encouraged to violate Georgia law and bypass the school’s
main office to speak directly with the teachers without obtaining a visitor’s pass. Further,
GAO implemented tier pricing and advised its representatives to advertise that schools
could make a 50 percent profit when most of the products offered did not garner that
amount of profit. He discussed his concerns with his manager, Chris Plummer, and
advised him that he could not maintain his position at the current pay level. He then
declined Mr. Plummer’s offer of an advance against commissions because he did not
want to increase his debt with GAO.

       He agreed that in March 2011, he and Mr. Patterson discussed his resignation and
a plan to work together servicing the same territory in March 2011. He identified an
email, dated April 14, 2011, in which Employee provided a QSP representative
information about the territories serviced by them. The email, addressed to Myers
Parsons with QSP, provided as follows:


8
  Mr. Coley also signed a promissory note upon his resignation in which he agreed to remit payment for
the balance of his 8000 account.
                                                - 14 -
       Here are the numbers based on total gross dollars for Brad Patterson and
       Shannon Coley:

                     Magazines: 517,000
                     Gift: 225,000
                     Cookie Dough: 301,000
                     Candy: 309,000
                     Discount Cards: 14,000

                     Total Business: 1,366,000 + Gross Business

       Just let me know if you need anything else. We would like to start effective
       June 1st 2011. I look forward to hearing from you.

        Mr. Coley acknowledged that despite his intent to resign from GAO, he submitted
his sales projections on May 10, 2011, in which he predicted $145,000 in sales for the
Fall 2011 season. He admitted that GAO likely ordered brochures and products based
upon his sales projections submitted in May 2011. He explained that he had not yet
committed to Mr. Parsons concerning his possible employment with QSP at that time.
He then identified an email, dated May 16, 2011, in which he discussed his signing of a
QSP distributor agreement with Micah Dowling, a QSP employee. He confirmed his
intent to resign from GAO and join QSP with Ms. Dowling on May 27 by stating, “I’m
all in.” He had also confirmed his plan with Employee at some point in May 2011.

       Mr. Coley admitted that he may have advised two clients of his possible plan to
leave GAO prior to his resignation. However, he claimed that he did not sign customers
for himself prior to his resignation and that he did not advise his customers to wait for
him to start his fundraising business. He identified an email, dated June 21, 2011, at 9:09
a.m. in which he advised his clients as follows:

       I wanted to let you know some exciting news. I now have a new line up of
       fundraising products. I saw a need to make some changes in product
       brands in order to offer new options and improve things for my schools.
       There is no changes in service or how I do fundraising programs. The only
       thing that has changed is the brand names. Nothing has changed on how
       the fall or spring fundraiser will work. I will get the new information to
       you as soon as possible. Give me a call or send me an email when you get
       a chance or have some questions. This is my new email and my phone
       number is the same.



                                           - 15 -
He claimed that GAO also attempted to solicit his clients and that he competed against
the representative hired in his stead.

       Mr. Coley testified that he produced 26 program agreements for the Fall 2010
season but that he only produced a few agreements for 2011. He admitted that he did not
use his best efforts to generate business for the 2011 season and that he stopped selling
for GAO at some point in 2011, despite the fact that he collected a paycheck from GAO
through June 30, 2011. He further admitted that he and Employee submitted program
agreements to QSP on June 21, 2011. He also organized Treasure Leaf, a limited liability
company, in June 2011 to combine his business with Employee and to receive payments
from QSP. They used the Treasure Leaf account from Summer 2011 through 2012. He
received two wire transfers, totaling $63,700, from QSP that were deposited into his
personal bank account. He wrote two checks, totaling $55,950, to Employee and
withdrew cash for himself but never transferred any of the funds to Treasure Leaf. He
admitted that these funds were also not reported on his tax return. He claimed that it was
not his intent to conceal the funds.

        Robert Wayne Holder testified that he worked for GAO from 1990 through 2005.
He stated that he did not leave with a balance on his 8000 or commission accounts. He
explained that he simply “kept [his] draw low enough” to ensure that his bonus covered
any balance. He recently returned to GAO to work as a sales representative in the
territory formerly occupied by Employee and Mr. Coley in 2011.

        Mr. Holder testified that he, along with other representatives, routinely completed
program agreements after the national sales meeting in February. He stated that program
agreements are not binding contracts even though such agreements are relied upon in the
regular course of business as a forecasting measure to set the calendar for the season. He
provided that upon his return to GAO, he was provided with “the book of business that
[Employee and Mr. Coley] worked with the previous year.” He explained that the “book
of business” contained client information for his territory, which included some of his
prior clients from his first term of employment with GAO. He expected that some
program agreements would be in place because he was hired in June; however, he soon
discovered that neither Employee nor Mr. Coley had secured many program agreements
prior to his hiring. One program agreement submitted by Employee was for a school that
no longer existed and had not been operational for approximately four years. When he
attempted to contact those who actually signed with GAO the previous season, he
discovered that most had already signed agreements with other companies. He was only
able to retain approximately 15 percent of the schools previously serviced by GAO in
addition to his 20 or 30 clients he brought GAO from his independent fundraising
business he operated prior to his hiring in 2011.

                                           - 16 -
        Kevin Hawley testified that he is currently employed as the Vice President of
Sales for GAO. He stated that he worked as a sales representative from 1981 through
2000 and that he received his title of Vice President of Sales in 1998. He is responsible
for, inter alia, hiring and training new sales representatives. He stated that GAO began
developing the magazine division in 2002 and implemented the program in 2003. He
stated that GAO hired several QSP employees to develop the division and train their sales
representatives how to sell magazines. He provided that those coming from QSP to
develop the magazine division were paid on the same compensation schedule as existing
employees for all products but magazines. Such representatives received a higher
commission rate of 25 percent for magazine sales and were also provided a car allowance
through the Runzheimer program. Such representatives also received a guaranteed
income and were not responsible for balances on the 8000 and commission accounts for
his or her first two years of employment. He stated that representatives who accrued
balances on the accounts beyond the first two years of employment were expected to
reconcile the accounts at the end of each fiscal year on June 30. He agreed that some
were allowed to accumulate a balance beyond the June 30 date.

       Mr. Hawley explained,

       I think we probably assumed, or they assumed, that they would actually get
       back all of their customers that first year back in the territory. In many
       cases that didn’t happen. And, so, [Thomas Belli], felt like, knowing these
       people from his previous years at QSP, that these people would grow their
       sales, build back their business and, basically, right their commission
       accounts and 8000 accounts.

Despite this belief, the representatives remained responsible for the balances on his or her
account. GAO eventually developed an overdraw reduction plan to assist representatives
in reconciling their balances. Employee was offered the plan and agreed to participate.

       Mr. Hawley testified that Employee submitted a sales forecast for the Fall 2011
season and had communicated that he was “on board,” “engaged,” and expected a growth
in sales for the following Fall. He provided that Mr. Coley also projected a growth in
sales for the Fall 2011 season. Employee even participated in the part-time allowance
program and submitted time sheets for his wife, who allegedly assisted him in preparing
for the Fall 2011 season. He conceded that he was without evidence to establish that
Employee knew of his impending resignation at the time he submitted the sales forecast
and the request for approval of his wife’s time sheets. He telephoned Mr. Holder within
24 hours of Employee’s resignation in an attempt to secure the sales territory for the
upcoming season. He identified a letter, dated August 16, 2011, sent to clients in the

                                           - 17 -
territory informing them of the change in representatives and asking them for their
continued business.

       Employee testified that he began working for QSP in 1989, following his
graduation from college. He began by assisting his father, who was in a management
position at the time. Two years later, he was hired by QSP as a sales representative. He
continued to work with his father but also serviced his own accounts. He then received
his father’s accounts when his father retired in 1992. He has continued to maintain a
number of the same accounts since that time.

       Employee testified that he, along with Mr. Brigman, then pursued employment
with GAO in 2003. He traveled to Nashville, Tennessee, where he met with a number of
people, including Mr. Ring and Ms. Laise. He could not recall Ms. Laise’s title but
claimed that she was a “major recruiter” and stated that she worked previously in the
finance division at QSP. He provided that he was invited to interview for a positon in the
newly-formed magazine division. He stated,

      [M]agazines, in the fund-raising business, are the most profitable because
      there is no product involved, there is no inventory, no delivery as far as
      trucks and things like that. You don’t have to have warehouses and things
      like that. So when orders come in, you just basically fulfill the orders
      electronically, and the magazine companies, the publishers, they send the
      magazines to the customer. So it’s very profitable for the company.

He stated that magazine sales required specialized knowledge and experience different
from that required for cookie dough or gift sales. He had amassed approximately 14
years of experience in magazine sales prior to his hiring at GAO. He was also in the top
12 out of 400 representatives in terms of sales production at the time.

       Employee recalled that Mr. Ring and Ms. Laise advised him that they intended to
hire people with experience who could bring established accounts but also train GAO’s
existing representatives. He also met with Mr. McDowell, who discussed the stock
program and advised him that he could be a millionaire if he brought his accounts to
GAO. He was not advised that GAO would not redeem his stock if he left the company,
that GAO could suspend his stock account, or that GAO could retain the money paid by
him into the program if it did not repurchase his stock. He claimed that that he would
have never participated in the program had he been so advised.

       Employee testified that he met with Mr. Ring and Ms. Laise a week later to
discuss further his potential for employment. He was advised to bring his W-2 and told
that they would discuss the specifics of his potential income. He noted that Mr. Ring left
                                          - 18 -
after approximately 20 minutes and that he continued the discussion with Ms. Laise, who
advised him that his pay would be based on his W-2 from QSP. He noted that his W-2 at
that time reflected an income of approximately $162,500. He recalled that she advised
him that his current income of $162,500 would be guaranteed for his first two years of
employment. He stated that he questioned his income level following the initial two-year
period because his sales figures at the time included a large account that represented
approximately $50,000 of his income. He explained that he was concerned that his
income would decrease if he was unable to secure the account upon his hiring.9 He
claimed that Ms. Laise advised him that his income would remain at $162,500 as long as
he continued to train the existing representatives. She also advised him that he would not
be responsible for charges on his 8000 account as long as he was assisting in the training
and development of the magazine division.

        Employee testified that Ms. Laise called him after the meeting and advised him
that an offer would be forthcoming. Thereafter, he received a contract for employment in
the mail. He signed the contract and returned it through the mail. He acknowledged that
he was instructed by GAO to comply with his covenant not to compete with QSP and that
he was placed in a different territory than what he previously serviced for QSP for his
first year of employment with GAO. His contract with GAO required him to use his best
efforts in generating sales for GAO and to adhere to duties of loyalty and good faith that
included the following provision:

          [GAO] asserts and [Employee] hereby acknowledges and agrees if
          [Employee] competes or prepares to compete directly or indirectly against
          [GAO] or any of its affiliates during the course of the agreement, or fails to
          dedicate his or her best efforts and full time to performing for [GAO] in
          accordance herewith because he/she is starting a new business or helping
          another start up or operate another business during the course of this
          agreement, then [Employee] will be liable to [GAO] for breach of loyalty in
          any instance.

His employment agreement specifically provided that he was entitled to $162,500 per
year for his first two years of employment. The agreement also specifically provided that
he would not be responsible for any overdraw on the commission account and did not
reflect that he would be held responsible for charges on the 8000 account. The agreement
further provided that he was entitled to a 25 percent commission on magazine sales. His
salary for his third year of employment was not specifically encompassed in the contract.
He stated that he never executed another document concerning his income with GAO.


9
    He was unable to retain the account. The loss of the account was detrimental.
                                                    - 19 -
        Employee stated that he did not work in his prior territory for his first year of
employment with GAO. Instead, he trained others and attended meetings held to develop
the magazine division. He provided that another representative was assigned to his
territory in an effort to solicit his prior clients on his behalf because he was prohibited
from doing so in accordance with his non-compete agreement with QSP. He returned to
his territory during his second year of employment but also continued to train others. He
asserted that he was successful in retaining his clients and was even offered an
opportunity to participate in the stock program in 2004 and 2006. He halted his
participation in 2010 after his pay had been reduced and he could no longer afford to
participate. He claimed that he never received a private offering memorandum from
Southwestern for either the 2004 plan or the 2006 plan. He asserted that a disclosure was
not provided informing him that his stock would not be repurchased unless he agreed to
offset the value of the stock by the balances held on his 8000 account and commission
account. He stated that his stock had not been repurchased at the time of trial. He
claimed that he invested $38,532 in stock that was now allegedly worth approximately
$106,000, according to GAO.

        Employee agreed that he received 12-pay worksheets generated by Mr. Ring but
denied ever participating in the generation of the document. He believed that he was
entitled to a guaranteed draw of $162,500 per the terms of his contract but that he was
advised that he was only eligible to receive a draw of $105,000 for the 2010/2011 fiscal
year. He agreed that he determined how he received the $105,000, namely whether he
would receive an advance and whether he would utilize the bulk buy program. He voiced
his concern and objection to his pay with Mr. Ring but later acquiesced to the application
of a portion of his draw to the 8000 account through the 12-pay system and the bulk buy
program. He explained that while he was not liable for the balance on his 8000 account,
he was liable for the purchase of his promotion prizes each year through the bulk buy
program. The following colloquy then occurred:

      Q.     Maybe I didn’t ask a good question or maybe you didn’t understand
      it. Let’s look at the 12-pay again.

      A.     I didn’t consider it paying on my 8000 account.

      Q.     Well, I understand you’re now saying you didn’t consider it, but let’s
      talk about what actually happened. You bought the bulk buy and it was
      placed on your 8000 account; correct?

      A.     Correct.



                                           - 20 -
      Q.     And then it was taken out of your draw, as shown on the 12-pay, and
      it was then applied to the 8000 account balance to pay for the bulk buy.
      That’s how it worked; isn’t it?

      A.     Yes.

       Employee testified that he sold products other than magazines, including cookie
dough, gifts, candy, and discount cards. He agreed that the commission for these items
was detailed in the yearly Pay Plans. He denied ever receiving a Pay Plan in the mail but
agreed that he viewed them at the national meetings each year. He explained that the Pay
Plans submitted by GAO in litigation were inapplicable to him and others hired from
QSP to start the magazine division. He stated that those operating under the Pay Plans
submitted at trial were not entitled to a salary component or the Runzheimer car expense
program. Further, the Pay Plans listed an 18 percent commission on magazine sales, as
opposed to the 25 percent commission he received. He explained that the 25 percent
commission was significant because approximately 70 percent of his business was
comprised of magazine sales. He claimed that GAO provided “Parallel Pay Plans,” one
for those coming from QSP and another for the existing GAO representatives.

       Employee acknowledged that he began receiving 8000 account statements
following his first two years of employment with GAO. He contacted Ms. Laise, who
explained that the statements were used to keep track of his brochure use and other items
but reassured him that he was not responsible for the charges. He contacted her again
when he continued to receive the invoices. She continued to reassure him on more than
one occasion and advised him not to worry about the statements. He later remitted
payment on his 8000 account in the amount of $14,000 on June 1, 2008. He explained,

      [Mr. Ring] contacted me [in May 2008] and said you have 30 days to make
      a $20,000 payment on your 8000 account.

      And I immediately questioned him and said, “What are you talking about?
      Have you talked to [Ms. Laise] about this?”

      Because I have asked – I have been getting statements with the 8000
      account [following his first two years of employment]. That was not what
      [Ms. Laise] told me. And, so, I questioned that very grievously. I was
      upset.

      [Mr. Ring] basically said, well, I have been asked to call you and tell you to
      make a payment on your 8000 account of $20,000 and you’ve got to do it
      by June 1st. And, so, I scraped everything up I could. He said that my job
                                          - 21 -
      depended on it after I discussed it with him. He was not upset. I was very
      upset . . . .

                                       ***

      But he told me he was asked to do that. Basically telling me, look, I’m not
      asking for this, somebody else is. And he was asking for $20,000 in 30
      days. And I scraped up as much as I could. I actually – it was not easy to .
      . . try to come up with $20,000.

He agreed that the funds were applied to his 8000 account balance at his direction. He
further agreed that he did not indicate in writing that his payment was made under protest
but claimed that he verbalized his disagreement. He acknowledged that money earned
through the C-prize program was also applied to his 8000 account balance. He explained
that the transfers were made internally without his involvement.

       Employee testified that following his first two years of employment, he paid for
his own fundraising expenses and that he was not reimbursed for approximately $65,000
in fundraising expenses in 2005. However, he claimed the expenses as a deduction on his
tax return. He further agreed that he had not received $162,500 from GAO since 2005.
He believed his reduction in pay was in violation of his Employment Agreement. He
discussed the issue with Ms. Laise and had “many discussions” with her thereafter. She
advised him that it would “get better.” He stated,

      I didn’t have anywhere to go. I mean, what – I mean, I was making great
      money, but it wasn’t the money that I signed my contract with, and what I
      understood I was supposed to be making. And many discussions were
      made about that with her, because [Ms. Laise] is the only person that we
      discussed financials with. And she also told us not to share that with
      anyone else [at GAO], because . . . other people . . . were not getting what
      we were getting, and we were told to keep that quiet. And the only
      discussions I ever had, as far as finances, were with [Ms. Laise], other than
      [Mr. Ring] sending an e-mail about a 12-pay, with no discussion.

He later signed the plan crafted by Mr. Belli to reduce his 8000 account balance.

       Employee testified that he and Mr. Coley first discussed their plan to leave GAO
in March 2011. He began speaking to Myers Parsons, a QSP representative, in April
2011. He provided Mr. Parsons with a list of his clients and an estimate of his sales on
April 14. He claimed that he had not made his final decision to resign until sometime in
May. Thereafter, he signed an independent distributor agreement with QSP on May 18,
                                          - 22 -
eight days after he submitted his projected sales forecast for GAO.10 He also requested
50 program agreements from Ms. Dowling on June 9, a week prior to his resignation. He
explained that he knew GAO would attempt to secure his accounts immediately upon his
resignation and that it would become a very competitive environment.

       Employee acknowledged that the effective date of his QSP agreement predated his
resignation with GAO by one day. He claimed that from February 2003 through June 16,
he never engaged in school fundraising business for any company other than GAO. He
insisted that he used his best efforts to solicit sales while still employed by GAO. He
later acknowledged that he only submitted 6 program agreements for GAO in 2011 but
that he submitted 12 program agreements for QSP four days following his resignation.11

      Employee agreed that he contacted clients within an hour of his resignation from
GAO, informed them that he was an independent contract, and requested their business.
The email he sent to his clients provided, in pertinent part, as follows:

          I just wanted to confirm our start date of []. I will get with you all well
          before then to get everything ready. I am excited to tell you that I am an
          independent contractor now which will not change the way we have done
          our sale but it will mean I will have more programs and benefits to offer! I
          look forward to working with you on our sale again this year. Would you
          mind confirming our date by a reply email and I will be in touch soon. You
          can use this email from now on as my contact or call me anytime.

He insisted that he did not meet with clients prior to contacting them by email. He
claimed that Mr. Holder immediately contacted his clients and that he and Mr. Holder
were even in the same schools attempting to secure agreements on the same day. He was
able to maintain some agreements because he had served in the schools and formed
relationships.

       Employee testified that that upon his resignation, he formed Cloverleaf
Fundraising, LLC; however, he worked as an independent contractor for QSP through
Treasure Leaf, the LLC owned and operated by Mr. Coley, for his first year of
employment. He agreed that QSP paid Mr. Coley directly instead of through Treasure
Leaf and that money received from QSP was not deposited into Treasure Leaf’s account.
He initially requested payment through Cloverleaf, his LLC; however, Mr. Parsons
refused, citing the possibility of a lawsuit with GAO. He claimed that he did not conceal
10
   He claimed that he had not made his decision to resign at the time he submitted his yearly sales
forecast.
11
     He submitted 42 program agreements for GAO in 2010.
                                                - 23 -
his income but agreed that his wife had no knowledge of at least one $46,000 payment
from QSP that was not included on his tax return. He simply neglected to include the
$46,000 payment because he never received a tax form documenting the same. He
acknowledged that it was his responsibility to prepare a 1099 form as the tax managing
member of Treasure Leaf. He also failed to report approximately $40,000 he received
from Treasure Leaf in 2012.

       Relative to his counter-complaint, Employee asserted that he requested
reimbursement for payments made to his 8000 account and for any salary reductions
made in violation of his Employment Agreement. He requested the return of his
investment in the stock program, including his initial investment and the current value of
the stock. He agreed that he received some documentation related to his participation in
the 2004 and 2006 stock plans. He completed stock election forms and was provided
with question and answer forms that provided, in pertinent part, as follows:

       Should your employment be terminated for any reason, including death or
       disability, the Company has the option to buy from you or your estate any
       shares you have purchased at the current Fair Value. Should you desire to
       sell your shares while still employed, the Company retains first right of
       refusal. The Company may purchase the stock at the lesser of the Fair
       Value per share or the price per share for which you offer to sell the shares
       to another party.

However, he denied receipt of the private offering memorandums, despite his execution
of a document indicating his receipt of the same. He acknowledged that he received a
disbursement check in the amount of $8,692.05 from Southwestern during the pendency
of this litigation.

       Employee’s wife, Angela Patterson, testified that she assisted Employee in his
fundraising efforts for GAO. She was paid as a part-time assistant approximately $5,800
in 2010 and $6,000 in 2011. Employee completed her timesheets and submitted them on
her behalf.12 She provided that in 2011, her assistance was limited to his Spring
contracts. She did not assist Employee in his fundraising efforts for Fall 2011.

        Mrs. Patterson claimed that she assisted Employee by organizing his fundraising
materials, delivering items to the schools, retrieving items from the schools, drafting
letters and promotional flyers, and inputting information into the computer program for
each fundraiser. She also assisted him with various promotions at the schools by setting
12
   Employee claimed that the time sheets were an accurate reflection of the hours worked. He explained
that they worked hard to meet certain sales goals for GAO in Spring 2011.

                                                - 24 -
up and tearing down displays. She noted that she was not paid for her assistance from
2004 through 2009. She agreed that she did not travel “as much” following her
employment with FSG Bank in March 2011 but stated that she continued to assist him in
his fundraising efforts.13 She claimed that it was possible that she even worked more than
what was reflected in the time sheets. She and Employee worked on the weekends to
complete the time-consuming tasks necessary to sustain his business for GAO. She
claimed that he also did not set up accounts or complete other tasks for QSP while
employed by GAO. She stated that Employee first expressed his intent to resign from
GAO in May 2011.

       Timothy Underwood, GAO’s Chief Financial Officer (“CFO”), testified that he
has held that position for approximately ten years. He provided that if Employee
breached his duty of loyalty, Employee would be liable for $15,000 in unearned
compensation he received in Spring 2011. He also testified extensively concerning
GAO’s estimated lost profits during that time period as a result of Employee’s breach of
his duty of loyalty. Using three different methodologies, he estimated that GAO lost
somewhere between $63,000 and $106,000 as a result of Employee and Mr. Coley’s
resignation. He agreed that his calculations did not account for the business Mr. Holder
brought to GAO upon his hiring.

      Kevin Hickman testified extensively concerning his education and professional
work experience as an accountant. He founded his own accounting firm, Hickman &
Associations, PC, in 1992 and has worked there since that time. He has seven employees
and occupies an office in the Southwestern/GAO building. He explained that
Southwestern is a client and is charged an hourly rate based upon work performed.

        As pertinent to this appeal, Mr. Hickman reviewed the tax returns for Treasure
Leaf, Clover Leaf, and the individual tax returns submitted on behalf of Employee and
Mr. Coley. He also reviewed bank statements, banking records, canceled checks,
expense reports, expense report summaries, and deposit records as provided by GAO. He
provided that Employee utilized both Form 2106, a form used to report employee
expense less any reimbursements, and Schedule C, a form used to report a net profit and
loss from a proprietorship. He believed that Employee was “moonlighting” or holding a
second job while still employed by GAO based upon his use of the two forms in 2006,
2007, 2008, and 2009. He stated that Employee reported no 2106 expenses in 2009,
2010, or 2011 and that his records reflected that Employee simply deducted those
expenses on his Schedule C form, which was favorable to him but not a proper
accounting practice.

13
  Employee conceded that he submitted timecards indicating that Mrs. Patterson was traveling on his
behalf during that time period.
                                             - 25 -
       Mr. Hickman stated that Employee’s net income was $126,000 in 2005; $114,000
in 2006; $94,000 in 2007; and $77,000 in 2008. He provided that Employee was not paid
$162,500 or more since 2005. He further claimed that Employee failed to accurately
report his income in 2011 and 2012.

       Thomas McDowell, III, testified that he has been employed by GAO since 1971.
He became the first president of the company in 1975 and served in that capacity until his
retirement in 2007. He recalled meeting with those recruited by GAO to start the
magazine division. His intent was to “spend time with them” and to “get to know them”
and “their dreams and goals.” He was also responsible for educating the prospective
representatives regarding the wealth accumulation opportunities provided if hired by
GAO. He explained that GAO is a wholly owned subsidiary of Southwestern, which
issued the stock program. He stated that participation in the stock program was
dependent upon each representative’s continued sales performance. He advised
prospective representatives of the particulars of the stock program, including the
requirements for participation and the possibility of receiving dividends. He also advised
prospective representatives of the possible value of his or her investment but did not
guarantee any results. He noted that he has advised representatives of the board’s
practice of refusing to redeem stock for those who resign and then compete with the
company. He provided that it was Cindy Johnstone’s responsibility to then identify who
was eligible for participation and to guide them through the process of participation.

       Ms. Johnstone testified that has been employed by Southwestern for
approximately 23 years. She recalled that she first served as a financial analyst but has
since attained the positions of Vice President, Secretary, and Treasurer of both
Southwestern and Great American. She has served in her current capacity for
approximately nine years. She also serves as Vice President, Secretary, and Treasurer of
all subsidiaries that are incorporated separately and has general financial oversight of
Southwestern and the other subsidiaries. She provided that Southwestern owns the stock
program that has approximately 400 participants. She recalled that the board of directors
adopted the program in 1990 and that Southwestern employs legal counsel to ensure
compliance with laws relating to the issuance of securities and to prepare the stock-
related documents.

       Ms. Johnstone testified that she is responsible for determining who may or may
not be eligible for participation in the Southwestern stock plan in accordance with his or
her level of sales or profits for GAO. She then requires each eligible employee to
complete an election form or provide some type of written authorization. She stated that
employees are then provided with a private offering memorandum, a copy of the stock
option plan as well as an option agreement, and a subscription agreement. She noted that
representatives and the company sign the stock option plan and the subscription
                                          - 26 -
agreement. She identified the subscription agreement, which provided, in pertinent part,
as follows:

          The subscriber understands and intends that the company and its counsel
          will rely upon the representations made by him in this Agreement and
          related documents and they are fully entitled to rely upon each and all of
          the same without further inquiry. He further agrees to save and hold the
          company and its counsel harmless by any loss or expense incurred by any
          of them by reason of their reliance thereupon.

She provided that Employee indicated his receipt of the documents and his understanding
of the stock option plan by signing the document. She stated that her records further
indicated that Employee was issued a private offering memorandum, identified as
Number 53, for the 2006 stock program. She stated that Employee’s stock account had
since been suspended as a result of the litigation. Despite this fact, Employee received
payment of a dividend check with interest in August 2014. She provided that his
investment was currently valued at approximately $99,000. She agreed that Employee
would have to find a willing buyer if Southwestern refused to repurchase the stock and
that there were certain limitations to securing a buyer.

       Ms. Johnstone stated that if Southwestern approved the request for redemption, it
would provide a promissory note, payable over a five-year period, instead of immediate
payment. She noted that once redemption was approved, any payment was subject to a
reconciliation process in which Southwestern offset the value of former employees’ stock
by amounts owed on the commission and 8000 accounts as indicated by GAO. She
provided that if an employee objects to the calculation, she refers them to Ms. Costa to
discuss the issue.

       Mr. Belli testified by deposition that he began working for QSP in 1977. He took
a three-year hiatus and worked for Reader’s Digest, QSP’s parent company, for two years
before returning in 1982. He served as a group product manager for various product lines
and became Chief Operating Officer (“COO”) in 1984. As COO, he oversaw marketing
product development and coordinated with the sales management. He was promoted to
President in 1986. As President, he oversaw marketing sales, operations, and public
relations and was responsible for the financial health of the company.

     Mr. Belli testified that he was asked to resign his position at QSP in February
2000. He remained unemployed until he was hired as Chief Executive Officer15 of
         14


14
     He resigned from QSP in 1995 to pursue other interests before returning in 1998.
15
     He filled the role of President once Mr. McDowell retired.
                                                   - 27 -
GAO in 2005. He received salary, expenses, and 70,000 shares of stock as part of his
agreement. GAO was housed in the same building as Southwestern, thereby providing a
different business culture than what he experienced at QSP. He explained that the
“organizational structure was kind of fluid” and that managers might “jump a couple
levels and talk to someone above their manager more frequently than at QSP.”

       Mr. Belli stated that he was specifically hired to assist in the development of the
magazine division. Approximately 11 different types of magazine programs were in the
beginning stages of development at the time of his hire. He believed the training of the
representatives was an important aspect of the viability of such programs because the
programs “should run with a school every year, not occasionally or on a hit-and-miss
basis.” He explained that “reorienting salespeople who had sold other product lines” was
not easy because the “tendency [is to] run a program – move on and run another program
at another school, whereas with magazines, it’s . . . more service oriented[.]” He
provided that those hired to develop the program at GAO

       were primarily responsible for training the other several hundred
       representatives who [GAO] had employed prior to their arrival.

       That process just involved those experienced representatives riding with the
       [GAO] veterans and teaching them school by school how the magazine
       program worked over the course of the time they were together.

        Mr. Belli testified that he was responsible for the budget in terms of reviewing and
developing compensation programs for the representatives. He acknowledged that GAO
maintained “parallel” compensation programs for those he termed GAO veterans and
those coming from QSP. He tried to build and ultimately integrate the different systems,
and he also worked to develop an incentive program to reduce the 8000 and overdraw
accounts. He described the 8000 account as a “catch-all” for expenses, including
promotional items ordered through the company. He noted that the 8000 account was a
“point of contention” for representatives because “it wasn’t always clear what was in the
8000 account.” He recalled that “quite a few” representatives spoke with him and
expressed concern about his or her 8000 account. He agreed that the accounts were not
settled at the end of each year and explained,

       We knew that they had relationships with schools, and that eventually, they
       would – their commissions would rise to the level that they needed or that
       they had had prior to coming to [GAO] . . . or rise to the level of the
       guarantee that they had when they came to [GAO].



                                           - 28 -
      So it was a retention issue, and it was particularly of concern to [Spencer
      Hays, Executive Chairman of Southwestern and CEO of GAO] and others
      that we . . . retain these people and that they do well. If they weren’t
      functioning well at all, they - - like anyone else, they had to move on, but
      for those that were . . . working diligently at the business . . . it was allowed
      to accumulate and move forward.

      In some cases, there was the thought that they would . . . be able to retain
      more business than they [were and that] would have cut back that overdraw
      amount, but things happen, recessions and so on, and that put them in a
      [place] sometimes in which they could not meet what their expectations
      were for a particular territory.

He denied ever advising a representative that he or she did not have to pay an overdraw
or the balance held on an 8000 account. He agreed that it was important to retain
representatives but that he assumed that overdraws and 8000 account balances would be
resolved in time.

       Mr. Belli testified that he attended board meetings and was present for discussions
concerning the redemption of stock. He stated that funds were taken out of operating
capital or profit to redeem stock because Southwestern did not maintain a specific reserve
for redemption. He stated that, in general, specific representatives were never “singled
out” at board meetings but that a discussion was usually had with respect to whether the
company could afford to redeem the stock. He explained that the cash was not available
to allow redemption on a yearly basis. He agreed that at times, stock was not redeemed
when a “technical issue” was enforced by the board.

        Relative to Mr. Belli’s individual stock plan, he could not recall whether he ever
received a written agreement. He stated that Cindy Johnstone, Vice President and
Treasurer of Southwestern and GAO, provided annual reviews of his stock with him
individually and with other senior managers. She explained what the stock was worth
when it was awarded and how it had grown over a period of time. He later asked for
clarification because she retained the reviews and did not provide him with the
documents. He understood that following five years of employment, his stock could be
redeemed over a five-year period upon his exit from the company. He stated that his
initial award of 70,000 shares of stock “trifurcated and became 210,000” shares “a few
years” after his initial hire date. He negotiated his stock package with Henry Bedford,
CEO and Chairman of the Board of Southwestern and GAO. He claimed that the stock
plan was a “major” reason for his decision to join GAO but that his understanding of the
agreement was later questioned by Mr. Hays in 2010.

                                            - 29 -
       Mr. Belli testified that at a meeting in 2010, Mr. Hays advised him that he could
earn 210,000 shares if he stayed with GAO for another 10 years. He explained that he
believed he had already earned said shares and that Mr. Hays became “perturbed” when
he indicated as such in the meeting. He stated,

          [S]uddenly I was confronted with the fact that unlike the rest of my team
          and everybody else at [GAO] who had received or earned stock, I was
          being told that the 210,000 shares that I had received and had reviews about
          were suddenly being represented to me as something that I would have to
          earn over the subsequent 10 years.

He stated that he left the meeting “wondering where [he] stood with regard to the stock
that I had earned and had been reviewed with me each of the previous years by [Ms.
Johnstone and Mr. Bedford].” He continued,

          Well, I had been trying to formalize [my agreement] with [Mr. Bedford] for
          some time, and everybody was being very squirrely about it and never
          would really meet with me and discuss that.

          I can’t recall whether I immediately or in the weeks that followed talked to
          [Mr. Bedford] about it, but I explained to [Mr. Hays] that that’s what had
          happened, and [that] I had never been in a situation like this before.

          I had been fortunate in working with the other companies that I work with
          where promises made were always promises kept, and . . . I was counting
          on that stock as part of my retirement.

He provided that Mr. Hays advised him that the current offer of 210,000 shares for an
additional 10 years of employment was all that was available to him.

       Mr. Belli stated that his separation agreement was dependent upon the
participation and acquiescence of two other members of the initial team, Ms. Laise16 and
Kurt Gengenbach.17 He explained, “[T]he three of us were lumped together, and if one

16
     He provided that Ms. Laise worked in sales administration at GAO.
17
   His separation agreement was admitted into evidence as an exhibit. His agreement provided as
follows:
         [Mr. Belli] agrees he has never been awarded or owned any stock or options in [GAO] or
         [Southwestern] and further agrees that he does not have any rights to or interest in any
         stock or stock options of [GAO] or [Southwestern].

                                                   - 30 -
didn’t agree, nobody else would be paid.” He ultimately accepted an agreement that was
not the amount promised in terms of stock because he believed his failure to accept
would “be a hardship” on the other members.

       Mr. Hays18 testified by deposition that he currently has a business interest in and
holds various titles in the following companies: Southwestern, GAO, Tom James
Company, and Athlon Sports. He testified in detail concerning his long-time
involvement with Southwestern and the creation of GAO. He served as the Executive
Chairman of the Board of Directors for Southwestern and CEO of GAO. He stated that
those coming from QSP to develop the magazine division for GAO were asked to sign a
contract indicating that they would honor their non-compete with QSP upon his or her
hiring with GAO. He agreed that those employees were also required to divulge their
current contacts and territories at QSP to ensure that those contacts and territories were
not targeted for sales during the non-compete period.

       Mr. Hays provided that he spent time with Employee in his sales territory in an
attempt to secure a fundraising client. He agreed that a preexisting relationship is
beneficial to securing clients in the fundraising business.

       Mr. Hays stated that the Board of Directors for Southwestern decides whether to
redeem shares in the stock program based upon a consideration of a number of factors,
including whether such redemption would pose a hardship on the company, whether it is
in the best interest of the company, and whether the former employee has harmed the
company. He stated that the Board decided not to redeem Employee’s shares based upon
the aforementioned factors, specifically because he negatively affected the company by
competing, by failing to fulfill his financial obligations, and by requesting payment for
work allegedly completed to secure business for Fall 2011. He provided that
Southwestern has redeemed stock for other employees and that since 1982, it has
redeemed approximately $117,651,401 in stock.

       Mr. Brigman’s testimony from his trial was admitted as an exhibit. His
recruitment and tenure with GAO was remarkably similar to that experienced by
Employee. He too met with Mr. Ring and Ms. Laise in Nashville while still employed by
QSP in 2003. He was also specifically told that he would not be held financially
responsible for his 8000 account and was assured he would “be taken care of.” He was
promised a guaranteed income, a 25 percent commission on magazine sales, a growth
bonus, and a car allowance program, along with other incentives. Thereafter, he received
statements documenting his balances on his commission and 8000 accounts. He
questioned Ms. Laise, who told him he was not responsible for the charges. He later

18
     Mr. Hays passed away during the pendency of this litigation on March 1, 2017.
                                                  - 31 -
made a one-time payment of $11,000 on his 8000 account balance because he was
threatened with the loss of employment.

       Mr. Brigman further testified that the Pay Plans did not reflect his actual
commission percentages. He explained that his commission percentages were higher
than what was reflected in the Pay Plans until 2008 or 2009 when GAO slowly increased
the commission rate for all employees. He further claimed that 8000 account charges
were not part of the deal for the “first few” people who left QSP to start the magazine
division at GAO. He claimed that prior to 2010, he was unaware that GAO intended to
apply bonuses and other income to his 8000 account balance. He believed that his initial
employment agreement afforded him a guaranteed income for at least two years and that
the agreement could only be changed by an “executed written document”. He provided,

      I had already been told my income would never go down, I didn’t have to
      worry about it. I was the one that came there. It was a good deal for them.
      I brought them, again, a multi-million dollar product line. And so for them
      to guarantee me an income for the length of time I was there was a very,
      very lucrative deal for them.

He explained that his income was not solely based on his production because he had
other responsibilities. He agreed that he received the periodic Pay Plans but alleged that
he “[t]ossed them to the side” because they did not apply to him.

       Relative to the stock program, Mr. Brigman’s experience was also similar to
Employee’s. Mr. Brigman claimed that he was told that his stock options could make
him a millionaire. However, he was never provided with a copy of the private offering
memorandum or other documentation of the particulars of the stock plan when it was
advertised at national sales meetings. He was also never advised that Southwestern could
refuse to redeem his stock if he were terminated or resigned from GAO.

       Sandy Harris, another former QSP turned GAO representative, testified by
deposition that he has known Employee for approximately 32 years. He explained that
he was mentored by Employee’s father when he first entered the fundraising business as a
QSP representative in 1981. He later joined GAO after speaking with Mr. Brigman and
others who had resigned from QSP. He recalled that Ms. Laise called him to discuss his
potential employment with GAO and that he later interviewed with Mr. Ring and was
hired. He testified that some schools may sign a program agreement but then fail to
follow through with the fundraiser as agreed. He provided that GAO did not then require
compliance with the agreement or pursue legal action against the school.



                                          - 32 -
       Mr. Harris stated that he participated in the stock program while employed by
GAO. He later sold the stock back to Southwestern and received payment within three or
four months of his request for redemption. Mr. Harris testified that he was still working
for GAO as a co-manager with Chris Plummer prior to Employee’s resignation in 2011.
He explained that he was nearing retirement age when he was paired with Mr. Plummer
to “help ease [Mr. Plummer] into the job and ease [himself] out of the job.” He recalled
that he managed Employee during that time period and that the current president of GAO,
John Davis, asked him to determine whether Employee planned to stay with GAO. He
provided that he too was concerned about Employee’s intentions because Mr. Brigman
and others had resigned around that same time period in March 2011. At Mr. Davis’s
direction, he questioned Employee’s intentions concerning his tenure with GAO. He
provided that Employee assured him of his intent to remain employed by GAO; however,
Employee later resigned. He attempted to schedule various meetings between Employee
and those in leadership positions for the purpose of enticing Employee to remain with
GAO. His efforts proved unfruitful.

       The trial court failed to issue an opinion within a year and a half following the
final day of trial in January 2015. The Supreme Court advised the trial court, on
September 23, 2016, that it would issue a mandamus requiring completion if the court did
not issue a ruling by the close of business on September 26. Thereafter, the court issued
a ruling, finding in favor of Employee and providing the following credibility
determination.

       The Court finds after observing [Employee’s] demeanor and testing it
       against the other evidence, that [he] was a credible witness. The Court
       believes that [he] was telling the truth about his expectations at GAO based
       on representations, the post-hiring representations that he did not have to
       worry about the [commission] and 8000 accounts, and the reasons that he
       made the lump sum payment.

       The Court concludes that GAO made the representations (through its
       representatives) to [Employee] that he would not have to pay any
       outstanding balances that might accrue on his [commission] and 8000
       Accounts and that his salary would never decrease to induce him to come to
       GAO to work. [Employee] paid a substantial lump sum on his GAO
       accounts under threat of discharge. GAO put him in the position of either
       paying a lump sum or forfeiting a job that paid substantially more than that
       annually. [Employee] chose the former.

In dismissing the breach of contract claim, the court found as follows:

                                           - 33 -
      Here, although GAO is insisting on strict enforcement of its right to recover
      substantial amounts of money against [Employee] by virtue of [his] 8000
      and commission accounts, it failed to take the necessary steps [to close the
      loop] on this potential contractual right. The use of the word “executed” in
      various parts in the Employment Agreement called particular attention to
      how it was used in various parts of the contract. Subsequent pay plans
      prepared by GAO were not in the same form as the original Exhibit “A” to
      the Employment Agreement in two important ways: 1) the body of the
      subsequent pay plans were not in the same form; and 2) the original Exhibit
      “A” had a place for the parties to sign it. Given that it is undisputed that
      GAO drafted the Employment Agreement and the original and subsequent
      pay plans, the Court determines that the original Employment Agreement
      was never supplemented by legally enforceable pay plans. The Court
      concludes, therefore, that the original Employment Agreement remained as
      it was when the Employment Agreement was signed until it was terminated
      when [Employee] left GAO.

The court further found that GAO failed to timely reconcile the accounts and assured him
that he “did not have to worry” about the 8000 account. The court held that Employee
was not liable pursuant to the doctrine of quantum meruit because GAO “never did take
the actual steps to close the loop on the version of the employment agreement it is
asserting in the lawsuit.” The court further found that that Employee had “engaged in a
minimal amount of competitive conduct” while still employed but that GAO failed to
prove that it suffered damages as a result of this competitive conduct.

        Relative to Employee’s counter-complaint, the court held that Employee was
entitled to redemption of his stock and ordered GAO to direct Southwestern to pay the
current fair market value of the stock. The court noted that GAO had the apparent
authority to direct Southwestern to do so because GAO had previously “engaged in
conduct that prevented [him] from being able to redeem his stock.” The court held that
Employee’s remaining claims were not cognizable but failed to issue findings of fact in
support of its conclusion. This timely appeal followed.

                                    II.    ISSUES

      We consolidate and restate the issues on appeal as follows:

      A.    Whether the court abused its discretion in considering statements
      made by Ms. Laise before and after Employee’s hiring.

      B.     Whether the court erred in dismissing the breach of contract claim.
                                          - 34 -
       C.     Whether the court erred in dismissing the quantum meruit claim.

       D.    Whether the trial court erred in ordering GAO to redeem stock
       purchased from its parent corporation, Southwestern.

       E.    Whether the trial court erred in failing to award damages
       proximately caused by Employee’s breach of his duty of loyalty to GAO.

                           III.    STANDARD OF REVIEW

       This case was tried by the court without a jury. On appeal, the factual findings of
the trial court are accorded a presumption of correctness and will not be overturned
unless the evidence preponderates against them. See Tenn. R. App. P. 13(d). The trial
court’s conclusions of law are subject to a de novo review with no presumption of
correctness. Blackburn v. Blackburn, 270 S.W.3d 42, 47 (Tenn. 2008); Union Carbide
Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993).

       In this case, it is necessary to construe the Employment Agreement. The
interpretation of written agreements is a matter of law to be reviewed de novo on the
record according no presumption of correctness to the trial court’s conclusions of law.
See Guiliano v. Cleo, Inc., 995 S.W.2d 88, 95 (Tenn. 1999). The trial court’s
determinations regarding witness credibility are entitled to great weight on appeal and
shall not be disturbed absent clear and convincing evidence to the contrary. Morrison v.
Allen, 338 S.W.3d 417, 426 (Tenn. 2011).

                                   IV.    DISCUSSION

                                             A.

        GAO claims that Ms. Laise’s statements to Employee were inadmissible hearsay
and should not have been considered by the trial court. GAO provides that the court
never issued a ruling on its hearsay objection prior to its issuance of the opinion.
“Generally, the admissibility of evidence is within the sound discretion of the trial court.”
Mercer v. Vanderbilt Univ., Inc., 134 S.W.3d 121, 131 (Tenn.2004). “The trial court’s
decision to admit or exclude evidence will be overturned on appeal only where there is an
abuse of discretion.” Id. Hearsay is defined as “a statement, other than one made by the
declarant while testifying at the trial or hearing, offered in evidence to prove the truth of
the matter asserted.” Tenn. R. Evid. 801(c) (emphasis added). Hearsay is inadmissible
in trial court proceedings unless it falls within one of the recognized exceptions to the

                                            - 35 -
hearsay rule. Tenn. R. Evid. 802; Mitchell v. Archibald, 971 S.W.2d 25, 28 (Tenn. Ct.
App. 1998).

        We hold that Ms. Laise’s statements were not inadmissible as hearsay because
said statements were not offered to prove the truth of the matter asserted, namely that
Employee actually had a guaranteed income that would never decrease or that he was not
liable for the balance on his commission and 8000 accounts. Rather, the statements were
submitted to prove that assurances were made and to establish Employee’s reliance upon
the same, despite his receipt of account statements indicating otherwise.

       Next, GAO claims that said statements were not binding on GAO when Ms. Laise
did not possess the requisite authority to make such statements on its behalf. We find this
argument disingenuous. Despite claims to the contrary, the evidence presented was
insufficient to establish that Ms. Laise played a minimal administrative role at GAO
without authority. Indeed, the record reflects that she received a salary of approximately
$150,000 per year in 2002 and that her pay increased to $165,000 per year in 2007 and to
$173,250 in 2008. She also participated in the stock program, beginning in 2008. Her
direct supervisor was also listed as Henry Bedford, the Chief Operating Officer at the
time who later became the Chief Executive Officer. Further, testimony presented
established that she was an integral part of the hiring process for the QSP employees
hired by GAO to develop the magazine division and that she was responsible for
developing suggested Pay Plans and offers of employment.

        Lastly, GAO claims that said statements were not binding and that Employee
could not have justifiably relied upon them because the Parties’ course of dealing after
the alleged statements were made was consistent with the terms of the Pay Plans. We
disagree. The record reflects that the yearly Pay Plans were not applicable to Employee
until, at the very earliest, the 2008 fiscal year. Following 2008, the 8000 account was not
reconciled on a monthly or even yearly basis as provided for in the Pay Plans. The
commission account was also not reconciled on a yearly basis. Accordingly, we
conclude that the court did not abuse its discretion in considering the statements and
assurances made by Ms. Laise.

                                            B.

       GAO argues that the court erred in denying its breach of contract claim when the
Employment Agreement was modified pursuant to the Pay Plans that were “comparable
in form” as required. GAO claims that the court erroneously read a provision into the
contract requiring the parties to sign the Pay Plans. GAO notes that the agreement
prohibits a waiver or modification unless it is in writing and signed by the parties.
Employee responds that he never signed any of the Pay Plans allegedly incorporated into
                                           - 36 -
the original agreement and that the record is devoid of evidence establishing that he
received notification of the Pay Plans. He requests reimbursement of his $14,000
payment made under duress and additional damages based upon his justifiable reliance on
representations made to him regarding a guaranteed salary.

        The cardinal rule of contract interpretation is that the court must attempt to
ascertain and give effect to the intention of the parties. Christenberry v. Tipton, 160
S.W.3d 487, 494 (Tenn. 2005). In attempting to ascertain the intent of the parties, the
court must examine the language of the contract, giving each word its usual, natural, and
ordinary meaning. Wilson v. Moore, 929 S.W.2d 367, 373 (Tenn. Ct. App. 1996). “If the
language of the contract is unambiguous, the Court must interpret it as written rather than
according to the unexpressed intention of one of the parties. Courts cannot make
contracts for parties but can only enforce the contract which the parties themselves have
made.” Pitt v. Tyree Org. Ltd., 90 S.W.3d 244, 252 (Tenn. Ct. App. 2002) (internal
citations omitted) (emphasis added). However, the court may consider the situation of
the parties, the business to which the contract relates, the subject matter of the contract,
the circumstances surrounding the transaction, and the construction placed on the contract
by the parties in carrying out its terms. See Penske Truck Leasing Co., L.P. v.
Huddleston, 795 S.W.2d 669, 671 (Tenn. 1990); Minor v. Minor, 863 S.W.2d 51, 54
(Tenn. Ct. App. 1993).

       As pertinent to this appeal, the Employment Agreement provided as follows:

       Compensation

       (a)    For all services rendered by Employee under this Agreement, [GAO]
       shall compensate him/her in accordance with the Compensation Schedule
       which is attached hereto as Exhibit A, and which shall be deemed for all
       purposes to be an integral part of this Agreement.

       (b)    Each fiscal year during the term of this Agreement, [GAO] shall
       cause to be executed in writing a new Compensation Schedule and Sales
       Representative’s Pay Plan, effective July 1 of the new corresponding year,
       indicating the amount of compensation and the method for payment of said
       compensation for the services of Employee during the following fiscal year
       beginning July 1st. The new Compensation Schedule shall be considered a
       part of this Agreement and shall be known as Exhibit A for the
       corresponding year. In conjunction with each new fiscal year, [GAO] will
       advise Employee of his/her applicable Pay Plan to be set forth in a written
       Notification given in accordance herewith comparable in form to the
       Addendum made a part hereof.
                                           - 37 -
The terms of the Employment Agreement were not ambiguous; however, the Parties
failed to adhere to said terms. The record reflects that the Pay Plans were not
“comparable in form” to the original compensation schedule. The Pay Plans relied upon
by GAO provided the method of payment but did not set forth the amount of
compensation as required by the Employment Agreement. Further, many of the terms
contained in the Pay Plans did not apply or were not followed by the Parties.
Accordingly, we agree that GAO cannot prevail on its breach of contract claim because
the Employment Agreement was never supplemented by legally enforceable Pay Plans.

       However, we deny Employee’s claim for reimbursement of his lump-sum payment
of $14,000 on the 8000 account or any additional damages regarding the use of the
commission and 8000 accounts. While the Parties did not operate pursuant to a legally
enforceable Pay Plan, Employee acquiesced in his payment of $14,000 and other salary
reductions and payroll deductions to reconcile his accounts in exchange for continued
employment. He cannot now claim an entitlement to a reimbursement of these funds.

                                          C.

       GAO alternatively requests judgment on its quantum meruit claim. GAO again
asserts that Employee’s reliance upon Ms. Laise’s assurances was unreasonable and
claims that it did not waive its right to collect when it mailed invoices and statements
documenting Employee’s balances on the accounts. “Actions brought upon theories of
unjust enrichment, quasi contract, contracts implied in law, and quantum meruit are
essentially the same.” Paschall’s, Inc. v. Dozier, 407 S.W.2d 150, 154 (Tenn. 1966).
The terminology is frequently employed “interchangeably to describe that class of
implied obligations where, on the basis of justice and equity, the law will impose a
contractual relationship between the parties.” Id. Our Supreme Court summarized the
elements of a quantum meruit claim as follows:

      (1)    There is no existing, enforceable contract between the parties
      covering the same subject matter;

      (2)    The party seeking recovery proves that it provided valuable goods or
      services;

      (3)    The party to be charged received the goods or services;




                                         - 38 -
        (4)    The circumstances indicate that the parties to the transaction should
        have reasonably understood that the person providing the goods or services
        expected to be compensated; and

        (5)     The circumstances demonstrate that it would be unjust for a party to
        retain the goods or services without payment.

Doe v. HCA Health Servs. of Tennessee, Inc., 46 S.W.3d 191, 197-98 (Tenn. 2001)
(internal quotation and citations omitted). “The most significant requirement for a
recovery on quasi contract is that the enrichment . . . be unjust.” Paschall’s, Inc., 407
S.W.2d at 155. “The doctrine of unjust enrichment is founded upon the principle that
someone who receives a ‘benefit desired by him, under circumstances rendering it
inequitable to retain it without making compensation, must do so.’” CPB Mgmt., Inc. v.
Everly, 939 S.W.2d 78, 80 (Tenn. Ct. App. 1996) (quoting Lawler v. Zapletal, 679
S.W.2d 950, 955 (Tenn. Ct. App. 1984)).

        The circumstances presented here do not indicate that the Parties understood that
Employee was liable for the commission and 8000 accounts given Ms. Laise’s statements
at the time of Employee’s hiring and her assurances thereafter. The Parties also did not
operate in accordance with the Pay Plans. Further, the circumstances presented here do
not support a finding of unjust enrichment when Employee provided specific skills and
services to grow the magazine division at GAO while sacrificing his existing sales
territory to train others in the business for GAO’s benefit. With these considerations in
mind, we affirm the denial of GAO’s unjust enrichment claims.

                                                      D.

        GAO claims that Employee never sought redemption of his stock but requested a
judgment for consideration paid and interest.19 Further, GAO argues that Southwestern
provided the required disclosures and advised Employee that it had no obligation to
redeem the stock. Finally, GAO claims that it was without authority to direct its parent
company to redeem the stock as directed by the trial court. Employee claims that he is
entitled to treble damages, punitive damages, and attorney fees because the operation of
19
   A review of the counter-complaint reveals that Employee pled sufficient facts to support a claim of
redemption and also sought “such other further general relief to which [he] may be entitled.” Further, the
proof presented at trial supported a claim for redemption. Accordingly, we conclude that the relief
granted was within the scope of the pleadings and the proof. See generally Britt v. Massengill, No.
W1999-01129-COA-R3-CV, 2001 WL 204209, at *3 (Tenn. Ct. App. Feb. 26, 2001) (acknowledging
that courts of equity have the authority “to grant relief liberally under the general prayer for relief,” within
reason).

                                                     - 39 -
the stock plan was unfair and deceptive. He further claims that GAO’s conduct was
willful and knowing as evidenced by its denial of the benefits of stock ownership to
others.

       We first affirm the denial of any fraud-based claims based upon the purchase and
operation of the stock plan because the record confirms that Southwestern provided the
required disclosures and advised Employee that it had no obligation to redeem the stock.
The private offering memorandum provided as follows:

          If for any reason (including death or disability), an Option holder’s
          employment with the Company is terminated, whether by the Option holder
          or by the Company, the Company shall have an option to purchase, but is
          not required to purchase, the Shares of the Option holder.20

Additional documentation was also introduced and admitted into evidence establishing
that Employee was further advised that Southwestern had no obligation to repurchase the
stock upon an employee’s termination. We further agree that GAO does not hold the
requisite authority to direct its parent company to redeem the stock and we, therefore,
reverse the court on this issue. However, Ms. Johnstone testified that Southwestern
routinely offset the value of former employees’ stock by amounts owed on the
commission and 8000 accounts as indicated by GAO. Accordingly, we hold that if
Southwestern exercises its option to repurchase, then GAO must approve the repurchase
without offsetting the value of the stock by amounts allegedly owed on the commission
and 8000 accounts in light of our holding that Employee is not liable for the balances
held on the accounts.

                                                E.

       GAO argues that Employee’s competitive conduct while still employed amounted
to a breach of his duty of loyalty contained in the Employment Agreement and that the
court erred in denying its claim for damages. Employee responds that the record is
devoid of proof establishing that he diverted business to himself while still employed or
that he unlawfully prepared for his departure from GAO.

       In order to prevail in a breach of contract case, a plaintiff must prove “the
existence of a valid and enforceable contract, a deficiency in the performance amounting
to a breach, and damages caused by the breach.” Federal Ins. Co. v. Winters, 354 S.W.3d
287, 291 (Tenn. 2011) (citing ARC LifeMed, Inc. v. AMC-Tenn., Inc., 183 S.W.3d 1, 26


20
     The Company is defined as Southwestern.
                                               - 40 -
(Tenn. Ct. App. 2005)). Here, the Parties agreed that a valid contract existed in the form
of the original Employment Agreement, which provided, in pertinent part, as follows:

      6.     Duty of Loyalty.      [GAO] asserts and [Employee] hereby
      acknowledges and agrees if [Employee] competes or prepares to compete
      directly or indirectly against [GAO] or any of its affiliates during the course
      of the agreement, or fails to dedicate his or her best efforts and full time to
      performing for [GAO] in accordance herewith because he/she is starting a
      new business or helping another start up or operate another business during
      the course of this agreement, then [Employee] will be liable to [GAO] for
      breach of loyalty in any instance.

                                       ***

      8.     Breach.        Employee acknowledges that [GAO] will have no
      adequate remedy at law if Employee violates any of the terms hereof, and
      in particular, but without limitation, paragraphs 4, 5 and 6 hereof. In such
      event, [GAO] shall have the right, in addition to any other rights it may
      have, to obtain in any court of competent jurisdiction equitable or other
      extraordinary relief including injunctive relief to restrain any breach or
      threatened breach hereof or otherwise to specifically enforce any of the
      provisions hereof. In the event [GAO] resorts to legal action to enforce this
      Agreement or to recover damages caused by Employee, Employee will be
      responsible and liable for reasonable attorneys’ fees and costs of court
      incurred by [GAO] in such legal action. These remedies are not exclusive
      and [GAO] has the right to seek and receive any other legal remedies that
      are applicable and available under the circumstances. If legal action is
      pursued, Employee WAIVES ALL RIGHTS TO A JURY TRIAL on the
      issues made the basis of said legal action.

The court agreed that Employee had engaged in a “minimal amount” of competitive
conduct in violation of the Employment Agreement but that GAO failed to establish that
it suffered damages as a result of the breach. We disagree.

       This court has held previously that “an employee who breaches the duty of loyalty
may be required to surrender any compensation paid by the employer during the period of
the breach.” Efird v. Clinic of Plastic & Reconstructive Surgery, P.A., 147 S.W.3d 208,
220 (Tenn. Ct. App. 2003). Further, “an injured party may recover lost anticipated
profits when their nature and occurrence have been established with reasonable
certainty.” Waggoner Motors, Inc. v. Waverly Church of Christ, 159 S.W.3d 42, 58
(Tenn. Ct. App. 2004) (citations omitted). “This ‘reasonable certainty’ standard applies
                                           - 41 -
to evidence regarding the existence of damages,” not the “amount of damages.” (citing
Waggoner, internal citation omitted). Tennison Brothers v. Thomas, No. W2016-00795-
COA-R3-CV, 2017 WL 6403888, at *17-18 (Tenn. Ct. App. Dec. 15, 2017) (citing
Waggoner, 159 S.W.3d at 58). “Once an injured party proves that it has been damaged,
the amount of the damages need not be proved with certainty or mathematical precision.”
Waggoner, 159 S.W. 3d at 58 (citation omitted). “The amount of lost profits damages
may be based upon estimates.” Id.

       At trial, GAO claimed entitlement to $15,000 in unearned compensation paid
during Spring 2011 and lost profits as calculated by its CFO, Mr. Underwood. In
calculating lost profits, Mr. Underwood used the following three different methodologies:

            First, Mr. Underwood compared the 38 program agreements
      Employee obtained for GAO in Fall 2010 with the program agreements he
      obtained for GAO in Fall 2011, resulting in lost profits of approximately
      $99,215.33.

             Next, Mr. Underwood compared the program agreements obtained
      for QSP by Treasure Leaf in Fall 2011 with the program agreements
      obtained for GAO on the same accounts in Fall 2010, resulting in lost
      profits of approximately $63,946.60.

             Finally, Mr. Underwood determined that Treasure Leaf generated
      approximately $637,000 in gross commissionable sales for Fall 2011,
      resulting in lost profits for GAO of approximately $105,869.40. He
      explained that he converted the estimated gross sales to net sales by
      subtracting the 40 percent profit that is customarily awarded to schools
      based upon the industry standard. He then estimated the lost profits caused
      by Employee based upon a contribution margin of 27.7 percent.

The record reflects that Employee concocted a plan to leave GAO with Mr. Coley in
March 2011, began speaking with QSP in April, provided QSP with a list of his clients
and sales estimates on April 14, and then signed an independent distributor agreement
with QSP on May 18, a month before his resignation. Employee submitted a few
program agreements for GAO in Spring 2011 but then submitted 12 program agreements
for QSP within four days of his resignation.

       These facts establish, at the very least, that Employee was preparing to compete
and failed to dedicate his best efforts while still employed by GAO, thereby establishing
GAO’s entitlement to reimbursement of unearned compensation in the amount of
$15,000, plus attorneys’ fees and costs in accordance with the terms of the Employment
                                          - 42 -
Agreement. However, we further conclude that GAO’s claim for lost profits was
disproven by the nature of the fundraising business. The testimony presented established
that the program agreements were not binding in nature and that the attrition of clients
was an anticipated event when a representative moved to a different employer, with or
without an accompanying breach of contract, as evidenced by GAO’s solicitation of
QSP’s employees to develop the magazine division. We simply cannot hold that the lost
profits were a result of Employee’s breach of loyalty.

                                 V.     CONCLUSION

       The judgment of the trial court is reversed, as to the court’s holding regarding the
stock account and as to the denial of damages for Brad Patterson’s breach of loyalty. The
judgment is affirmed in all other respects. We remand for the collection of damages and
the assessment of attorney fees and costs pursuant to the terms of Employment
Agreement. Costs of the appeal are taxed one-half to the appellant, Great American
Opportunities, Inc., and one-half to the appellee, Brad Patterson.


                                                    _________________________________
                                                    JOHN W. McCLARTY, JUDGE




                                           - 43 -
