Nonprofit cooperative v. Conference America, Inc.

Alabama Case Law

CONFERENCE AMERICA v. TELECOMMUNICATIONS COOP., 1021047
(Ala. 1-30-2004) Conference America, Inc. v.
Telecommunications Cooperative Network, Inc., et al. No.
1021047. Supreme Court of Alabama. Decided January 30,
2004.

Appeal from Montgomery Circuit Court, CV-99-3680.

HOUSTON, Justice.

Conference America, Inc., appeals from the Montgomery
Circuit Court’s judgment on a jury verdict in favor of
Telecommunications Cooperative Network (“New TCN”) and one
of its employees, Chris Lipscomb. This case involves, among
other issues: 1) whether a contract, not for unique
personal services, that is silent on the issue of
assignability can be assigned, and 2) whether a juror’s
misrepresentations during voir dire were significantly
material so as to warrant a new trial. We hold that the
contract in this case was assignable, and we affirm the
trial court’s judgment relating to that issue and to
Conference America’s equitable claims. However, we hold
that Conference America is entitled to a new trial on the
remaining issues based on the misconduct of one of the jury
members.

I. Relevant Facts

Conference America is an Alabama corporation that provides
conference-call services. In 1995, Conference America was
selected by Telecommunications Cooperative Network of New
York, Inc. (“Old TCN”), a not-for-profit membership
cooperative that assisted nonprofit entities in using
telecommunications services, to provide conference-call
services to members of Old TCN.[fn1]

In 1997, Conference America and Old TCN entered into an
agreement (“the 1997 agreement”) pursuant to which
Conference America would pay Old TCN a 24% commission on
the services Conference America provided to members of Old
TCN. The term of the 1997 agreement extended from January
27, 1997, through December 31, 2000. The 1997 agreement was
silent as to whether the agreement was assignable.

By early 1998, Old TCN was having financial difficulties
and was close to filing a petition for involuntary
bankruptcy. Around that time, David Altshuler, who had
served as vice chairman on the board of directors of Old
TCN through July 1997, formed a for-profit corporation
named Telecommunications Management, Inc. (“TMI”). Pursuant
to a management agreement between Old TCN and TMI,
Altshuler, as president of TMI, took over the management of
Old TCN. In July 1998, TMI changed its name to
Telecommunications Cooperative Network, Inc. (“New TCN”). In
September 1998, the assets of Old TCN — including
its name, its goodwill, and the 1997 agreement —
were transferred or assigned to New TCN and Old TCN was
subsequently dissolved. New TCN is a for-profit
corporation, run by Altshuler as its sole officer and
director.[fn2] Conference America claims to have had no
knowledge of the transfer of assets of Old TCN to New TCN,
of the dissolution of Old TCN, or of the creation of New
TCN.

After New TCN acquired the assets of Old TCN, Conference
America continued to provide services and to remit
commissions to New TCN pursuant to its 1997 agreement with
Old TCN. In December 1998, Conference America executed
another agreement (“the 1998 agreement”) virtually
identical to the 1997 agreement that, among other things,
extended the term of the 1997 agreement through September
30, 2002.[fn3] The 1998 agreement referred to “TCN”; it did
not distinguish between “Old” TCN and “New” TCN. According
to Conference America, New TCN held itself out as being the
same company as the dissolved Old TCN.

Subsequently, the relationship between Conference America
and New TCN became strained; the reasons for the strain,
which are disputed by the parties, are not relevant here.
Conference America sued New TCN, Altshuler, Chris
Lipscomb,[fn4] and others, seeking, among other things, 1)
damages for fraud, breach of contract, repudiation of
contract, and moneys paid by mistake under a void
assignment of the 1997 agreement, and 2) declaratory and
injunctive relief. New TCN and Lipscomb each filed a
counterclaim. Following the trial, however, the only claims
that went to the jury were Conference America’s
breach-of-contract and fraud claims, New TCN’s counterclaim
alleging breach of contract and repudiation of contract,
and Lipscomb’s counterclaim alleging breach of contract.
Relevant to our discussion is the fact that the trial court
granted New TCN’s motion for a judgment as a matter of law
as to Conference America’s claim that it was entitled to
moneys paid to New TCN by mistake because, it argued, the
1997 agreement was unassignable.

The jury returned a verdict for New TCN and Lipscomb on
Conference America’s breach-of-contract and fraud claims
and on their counterclaims. The jury awarded damages on the
counterclaims in the amounts of $1,007,499.97, and $1,000
to New TCN and Lipscomb, respectively. The trial court
entered a judgment on this verdict.

Following the verdict, Conference America discovered that a
juror had given erroneous answers in his questionnaire and
on voir dire examination. It confirmed this fact through
investigation and memorialized its discovery and initial
investigation in a letter to the Court dated November 8,
2002, enclosing its investigative material.

On November 22, 2002, Conference America filed motions for
a judgment as a matter of law, a new trial, and to alter,
amend, or vacate the judgment, asserting, among other
things, juror misconduct and the alleged unassignability of
the 1997 agreement. Following two hearings (including an
evidentiary hearing on the juror-misconduct issue), the
trial court denied Conference America’s postjudgment
motions. This appeal followed.

II. Analysis

Conference America raises three issues on appeal. First, it
contends that the 1997 agreement was not assignable to New
TCN. Second, Conference America contends that it was
entitled to a new trial based upon juror misconduct. Third,
Conference America contends it was entitled to 1) a
judgment as a matter of law as to New TCN’s counterclaims
or, in the alternative, 2) a new trial based on the claim
that the jury’s verdict was against the great weight of the
evidence.

A. Assignability of the 1997 Agreement

At trial, the jury awarded New TCN $1,007,499.97 on its
counterclaim against Conference America alleging that
Conference America had breached the 1997 agreement.
Conference America contends that New TCN’s right to recover
under the 1997 agreement hinges on whether that agreement
was assignable without Conference America’s knowledge or
consent; we hold that it was so assignable.

As stated above, the 1997 agreement is silent as to its
assignability. In Sisco v. Empiregas, Inc. of Belle Mina,
286 Ala. 72, 76, 237 So.2d 463, 466 (1970), this Court
noted “the general proposition that personal service
contracts are not assignable.” In Sisco, we noted that
personal service contracts involve “a relationship of
personal confidence between the parties.” 286 Ala. at 76,
237 So.2d at 466. Such a relationship is one in which a
party would have “a substantial interest in having that
[particular] person perform or control the acts promised.”
Restatement (Second) of Contracts § 318(2)(1979).
This case, however, does not involve such a personal
relationship; rather, this case involves the performance of
an agreement by the unidentified agents, servants, or
employees of an impersonal corporation to provide
teleconferencing services to customers of another
impersonal corporation; contracts for such works are not
personal and may be assigned.[fn5]

Based on the above, we hold that the trial court’s rulings
based on the assignability of the 1997 agreement were
correct.

B. Juror Misconduct

The trial court refused to grant Conference America a new
trial based upon alleged juror misconduct. Our standard of
review on this issue is whether the trial court exceeded
its discretion in refusing to grant a new trial. Acceptance
Ins. Co. v. Brown, 832 So.2d 1, 12 (Ala. 2001) (“The denial
of a motion for a new trial is within the sound discretion
of the trial court.”).

The jury foreman, H.C., a Montgomery pastor who was not a
member of the original jury pool, failed to respond to
numerous questions posed during voir dire examination. The
trial court asked if any member of the venire had been
employed by a business entity referred to as “Call Points,”
which provided teleconferencing services. The name, Call
Points, was repeated four times. H.C. did not respond,
although he had in fact been employed by Call Points. The
trial court explained the nature of a teleconferencing
company and asked whether any member of the venire had ever
been employed by a teleconferencing company. Some members of
the venire responded to the question; however, H.C., who
had in fact been employed by a teleconferencing company,
did not respond. The trial court also asked if any member
of the venire had been involved in a contract dispute. H.C.
did not respond. In fact, H.C. had had three judgments
rendered against him in three collection actions and he was
involved in an ongoing paternity and child-support case. He
had been held in contempt twice in the paternity action.
The juror questionnaire asked if the prospective juror had
ever been arrested for or convicted of a crime. H.C.
responded that he had not; in fact, H.C. had been arrested,
convicted, and jailed on a bad-check charge.

“Not every failure of a prospective juror to respond
correctly to a voir dire question will entitle the losing
party to a new trial.” McKowan v. Bentley, 773 So.2d 990,
996 (Ala. 1999). However, where “improper responses or lack
of responses by prospective jurors on voir dire result[] in
probable prejudice” to the losing party, a new trial is
warranted. Freeman v. Hall, 286 Ala. 161, 166, 238 So.2d
330, 335 (1970).

In Freeman, we noted:

“Although the factors upon which the trial court’s
determination of prejudice is made must necessarily vary
from case to case, some of the factors which other courts
have considered pertinent are: temporal remoteness of the
matter inquired about, the ambiguity of the question
propounded, the prospective juror’s inadvertence or
willfulness in falsifying or failing to answer, the
failure of the juror to recollect, and the materiality of
the matter inquired about.”

286 Ala. at 167, 238 So.2d at 336. In Gold Kist v. Brown,
495 So.2d 540, 545 (Ala. 1986), a case involving a
collision between two trucks, a juror failed to disclose
that he was a truck driver. In holding that the trial court
did not exceed its discretion in granting a new trial, this
Court quoted the trial court’s definition of a material
fact as “`one which an attorney[,] acting as a reasonably
competent attorney, would consider important in making the
decision whether or not to excuse a prospective juror.'”
495 So.2d at 545.

We hold that the juror misconduct in this case clearly
warrants a new trial. This case involves a contract
dispute. Juror H.C. failed to disclose that he had been
involved in at least three contract disputes and that he
had been a defendant in legal actions involving those
contract disputes. H.C. failed to reveal that he had been
arrested, jailed, and convicted of a criminal offense. H.C.
had been charged with being in arrears in his child support
and was a party in a paternity action; in the
paternity/child-support action he had been served with
summons, complaints, and various orders 11 times and had
appeared before the circuit court 7 times. There is no
indication that the matters inquired about were temporally
remote, that the questions posed to H.C. were ambiguous, or
that H.C.’s misrepresentations were merely “inadvertent.”
Furthermore, given the subject matter of the action and the
parties involved (teleconferencing companies), the
materiality of the matters inquired about seems obvious and
was certainly of the type that “an attorney[,] acting as a
reasonable competent attorney, would consider important in
making the decision whether or not to excuse” H.C., who
ultimately served as the jury foreman. Under these
circumstances, the trial court exceeded its discretion in
denying Conference America’s motion for a new trial.

We also hold that the trial court’s resolution of the
equitable claims in this case is unaffected by any juror
misconduct and its judgment as to those claims is
affirmed.[fn6]

C. Conference America’s Motion for Judgment as a Matter of
Law or, in the Alternative, for a New Trial

Conference America contends that even if the 1997 agreement
was properly assigned to New TCN, Conference America is
entitled to a judgment as a matter of law as to the two
counts in New TCN’s counterclaim that went to the jury:
breach of contract and repudiation of contract. Conference
America argues that if the 1997 agreement was assigned to
New TCN, then New TCN became Conference America’s agent and
can have no recovery based on the 1997 agreement because
New TCN breached the agreement by violating its implicit
fiduciary duties[fn7] to Conference America by 1)
soliciting Conference America employees and 2) establishing
C3, an entity that competed with Conference America.

“`The standard of review applicable to a motion for
directed verdict or judgment notwithstanding the verdict
[now referred to as a preverdict and a postverdict motion
for a judgment as a matter of law] is identical to the
standard used by the trial court in granting or denying
the motions initially. Thus, when reviewing the trial
court’s ruling on either motion, we determine whether
there was sufficient evidence to produce a conflict
warranting jury consideration. And, like the trial court,
we must view any evidence most favorably to the
non-movant.'”

Glenlakes Realty Co. v. Norwood, 721 So.2d 174, 177 (Ala.
1998) (quoting Bussey v. John Deere Co., 531 So.2d 860, 863
(Ala. 1988)). The issue, therefore, is whether, when viewed
in the light most favorable to New TCN, there was
“sufficient evidence to produce a conflict warranting jury
consideration” as to whether New TCN was an “agent” of
Conference America, and, if so, whether New TCN breached
any implicit fiduciary duties so that New TCN may recover
under the 1997 agreement.

Whether one is an “agent” of another “`is to be determined
by the facts, and not by how the parties may characterize
the relationship,'” Mardis v. Ford Motor Credit Co., 642
So.2d 701, 705 (Ala. 1994) (quoting Butler v. Aetna Fin.
Co., 587 So.2d 308, 311 (Ala. 1991)), and is “generally a
question of fact to be determined by the trier of fact.”
Malmberg v. American Honda Motor Co., Inc., 644 So.2d 888,
890 (Ala. 1994). Essentially, Conference America claims
that New TCN, as its “agent,” owed a duty not to compete
with Conference America with regard to employees or
services. However, New TCN presented evidence indicating 1)
that there was no “exclusive” relationship between New TCN
and Conference America that would have made Conference
America the “sole” vendor of choice, 2) that New TCN did
not actually solicit employees of Conference America, and
3) that New TCN did not begin competing with Conference
America until after Conference America allegedly breached
its contractual obligations. After reviewing the record and
examining the evidence in the light most favorable to New
TCN, as we must, we hold that the evidence raised a
conflict sufficient to send this issue to the jury.
Therefore, the trial court did not err in denying
Conference America’s motion for judgment as a matter of law
regarding New TCN’s counterclaims.

Additionally, given our disposition of this case, we do not
reach Conference America’s contention that it was entitled
to a new trial based on the claim that the jury’s verdict
was against the great weight of the evidence.

III. Conclusion

Based on the foregoing, we affirm the trial court’s
judgment as to the equitable claims and its rulings as to
the assignability of the 1997 agreement and as to
Conference America’s motion for a judgment as a matter of
law. We reverse the trial court’s order insofar as it
denied Conference America’s motion for a new trial based on
juror misconduct, and we remand the cause for proceedings
consistent with this opinion.

AFFIRMED IN PART; REVERSED IN PART; AND REMANDED.

SEE, BROWN, and STUART, JJ., concur.

LYONS, HARWOOD, and WOODALL, JJ., concur in part and concur
in the result.

JOHNSTONE, J., concurs in the rationale in part but
dissents from the judgment.