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Bihm v. Deca Systems, Inc.

Court of Appeals of Louisiana, First Circuit

August 8, 2017

TIMMY AND SHELLY BIHM
v.
DECA SYSTEMS, INC. AND GERALD CALLAWAY

         Appealed from the 19th Judicial District Court in and for the Parish of East Baton Rouge, Louisiana Trial Court No. 598516 Honorable Timothy E. Kelley, Judge

          DALE R. BARINGER BENJAMIN J.B. KLEIN JAMES R. BULLMAN BATON ROUGE, LA, ATTORNEYS FOR PLAINTIFFS/DEFENDANTS-INRECONVENTION- APPELLANTS TIMMY AND SHELLY BIHM

          ROY H. MAUGHAN, JR. NAMISHA D. PATEL JOSHUA D. ROY BATON ROUGE, LA, ATTORNEYS FOR DEFENDANTS/PLAINTIFFS-INRECONVENTION- APPELLEES DECA SYSTEMS, INC. AND GERALD CALLAWAY

          BEFORE: PETTIGREW AND McDONALD, JJ., AND CALLOWAY, [1] J. Ad Hoc

          PETTIGREW, J.

         The plaintiffs/defendants-in-reconvention, Timmy Bihm (T. Bihm), Shelly Bihm (S. Bihm), and Bihm Calibration Services, L.L.P. (BCS)(sometimes referred to collectively as the "Bihm parties") appeal a July 15, 2015 judgment granted in favor of the defendants/plaintiffs-in-reconvention, Deca Systems, Inc. (Deca) and Gerald Callaway (Callaway)(sometimes also referred to as "defendants"), ordering the Bihm parties to pay defendants $83, 041.16 for conversion/misappropriation of Deca funds.[2] The judgment also awarded defendants $739, 319.00 as a base amount in damages for the Bihm parties' violation of the Louisiana Unfair Trade Practices and Consumer Protection Law, La. R.S. 51:1401, et seq., (LUTPA), and the Louisiana Uniform Trade Secrets Act, La. R.S. 51:1431, et seq., (LUTSA), and for intentional interference with business relations. The district court increased the base amount to $2, 217, 957.00, in accordance with La. R.S. 51:1409(A), which mandates an award of treble damages if the unfair or deceptive act(s) were "knowingly used" after being put on notice by the attorney general to cease such acts. The total monetary award to Deca and Callaway was $2, 300, 998.16. The judgment also ordered T. Bihm to return to Callaway the Deca stock that previously had been donated to him by Callaway, as well as any dividends (as "fruits" of the donated stock -see La. C.C. art. 1566) that Deca had paid to T. Bihm. The judgment further ordered the Bihm parties to pay Deca and Callaway attorney fees in an amount "to be determined, if not agreed upon by the parties, at a subsequent Rule for Costs, " together with legal interest from the date of judicial demand, and all costs. Deca and Callaway answered the appeal, asking this court to increase the damages awarded to them for the Bihm parties' violation of LUTPA, LUTSA, and intentional interference with business relations and all attorney fees and costs of this proceeding. After a thorough review, we amend in part, affirm as amended, and deny the answer to the appeal.

         FACTUAL BACKGROUND

         Callaway incorporated Deca in 1982. Deca is a closely held domestic corporation engaged in the business of calibrating and certifying industrial instrumentation, as well as repairing, renting, and selling industrial instrumentation. By all accounts, Deca was/is a successful and reputable business. Initially, Callaway had a business partner who had expressed an interest in investing in the company, but never became actively involved. This partner ultimately separated from Deca and returned his stock to Callaway. According to Callaway, he began looking for qualified and loyal employee(s) whom he could make equity owners of Deca with the anticipation that this person(s) would assure the continuity of Deca's business at his death or retirement.

         Callaway hired T. Bihm, who ended up working at Deca for over twenty years, as a buyer in October 1990. At the time of hire, T. Bihm was twenty-two years old and newly wed to S. Bihm who, in 1996, also began working at Deca as a bookkeeper. T. Bihm worked as a buyer of instruments for Deca to repair for approximately two years, but over the years, eventually moved through various positions within Deca, learning the trade of instrument calibration, renting, selling, and repairing instrumentation. Ultimately, he became general manager of the business and vice president of the company. According to T. Bihm, he "ran the company for many years." T. Bihm worked at Deca from his date of hire in 1990 until November 30, 2010; his last day in the office was November 22, 2010.

         In 1998, approximately eight years after hiring T. Bihm, Callaway transferred 24 shares of common stock of Deca to him. Again, in 2008, Callaway executed a transfer of shares whereby T. Bihm received an additional 12 shares of Deca stock, resulting in T. Bihm owning a total of 36 shares of Deca stock. Callaway characterized the transfers as "gifts"; T. Bihm asserts that he paid "blood, sweat, and tears" for the stock, claiming he worked tirelessly over the years to grow Deca's business. According to T. Bihm, he was instrumental in taking the company into the computer age of technology and he worked long hours and weekends to develop, expand, and enhance Deca's database applications, following the initial installation and customization of such software by computer programmer, Jim Morrison, in 1995. This software allowed Deca to input and compile customer data and produce custom reports based on the compiled historical client and instrument information. The earlier service events database also provided, in a systematic and customized manner, information regarding client, vendor, and proprietary pricing information, formulas, patterns, compilations of information, methods, techniques, and processes for calibration of instruments, historical data on repairs, parts sold, rentals, and also allowed Deca to track the dates and intervals of its customers' instruments in order to regularly solicit business and perform required instrument certifications.

         According to Callaway, he envisioned the "unique" and "proprietary" design of Deca's software, and he directed Jim Morrison in its development at that time. In his capacity as general manager, T. Bihm had full access to the computer applications written by Jim Morrison, the company's later-acquired Peachtree financial systems, and calibration formulas and procedures. Over the years, following the installation and customization of Deca's software and databases, T. Bihm became proficient in the use of the software for running Deca's business and for calibration certification.

         T. Bihm's wife, S. Bihm, was hired in 1996 to do data entry. Callaway trained her in the basics of accounting, particularly, how to use Deca's accounting software. Eventually, S. Bihm became Deca's bookkeeper, a position of higher confidence and trust because she had full access to Deca's funds, was in charge of payroll and accounts receivables, and was also responsible for reconciling and overseeing the use of Deca's credit cards. S. Bihm worked at Deca until she left the company on July 22, 2010, when Callaway raised questions and concerns regarding a pay raise T. Bihm gave S. Bihm without Callaway's knowledge or consent.

         After S. Bihm's departure from Deca, Callaway hired Theresa Cockerham as the replacement bookkeeper. Ms. Cockerham discovered questionable credit card purchases that appeared to have been made by each of the Bihms for personal non-Deca related expenses and for which no receipts were found. It was further discovered that S. Bihm often used a signature stamp to provide Callaway's signature on checks that she wrote, not all of which were accounted for in Deca's business. Apparently, based on the appearance of impropriety raised by the Bihms' actions, as reflected by Ms. Cockerham's findings, Callaway met with his attorney and prepared documents amending Deca's articles of incorporation and removing the cumulative voting rights provisions to require a 51 percent vote of outstanding shares of stock (which only Callaway had) to seek involuntary dissolution, and removing T. Bihm as an officer and a member of Deca's board of directors. The new documents were dated November 2, 2010. Shortly thereafter, T. Bihm's employment with Deca was terminated effective November 30, 2010.

         On December 10, 2010, T. Bihm and S. Bihm formed their own instrument calibration business (including the calibration, selling, buying, rental, and repair of instrumentation) initially known as Quality Calibration Services, LLC, but shortly thereafter, changed to Bihm Calibration Services, LLC (BCS). It is undisputed that the Bihms' new business is in direct competition with Deca. After resigning, the Bihms requested that Callaway pay them $750, 000.00 for the Deca shares he gave to T. Bihm. Callaway refused, and this litigation ensued.

         PROCEDURAL HISTORY

         This lawsuit began in January 2011 with a Petition For Involuntary Dissolution of a Corporation filed by T. Bihm and S. Bihm, averring that they were the owners of not less than 20 per cent of the shares of Deca, and as such, they were entitled to seek involuntary dissolution pursuant to La. R.S. 12:143 (repealed by7014 La. Acts, No. 328, § 5, eff. Jan. 1, 2015). T. Bihm and S. Bihm alleged that Deca, the company for which they both had been employed and in which T. Bihm owned stock, was guilty of "gross and persistent" ultra vires acts. The district court granted Deca and Callaway's exception of no right of action and dismissed the Bihms' petition for involuntary dissolution of Deca. In a prior appeal, this court affirmed the district court's judgment. Bihm v. Deca Systems, Inc., 2013-2247 (La.App. 1 Or. 6/6/14), 2014 WL 3702473 (unpublished), writ denied, 2014-1452 (La. 10/10/14), 151 So.3d 585.

         This appeal before us now arises out of a reconventional demand filed on May 19, 2011, by Deca and Callaway against T. Bihm, and later amended to add S. Bihm and BCS as additional defendants in reconvention.[3] The original reconventional demand asserted claims against T. Bihm for ingratitude toward Callaway and his misappropriation of Deca's funds. Deca and Callaway averred that Callaway gratuitously donated 36 shares of Deca stock to T. Bihm during the many years that T. Bihm was employed by him at Deca, "as [T. Bihm] was being groomed to one day lead the corporation." The reconventional demand alleged T. Bihm's ingratitude toward Callaway, reflected by T. Bihm's acts of "cruel treatment and/or grievous injuries, " as the basis for Callaway's right to seek revocation of said donations. The demand also alleged a misappropriation of Deca's funds by T. Bihm, in the form of unauthorized purchases and payments made by him to himself and/or S. Bihm, claiming these acts were ultra vires acts and a breach of the fiduciary duty owed by T. Bihm to Deca, as an officer and director of the company. The demand ...


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