Motion for Writ in Ievolve, Inc. v. Gerald E. Hickson| Trellis.Law

On March 18, 2020 a Party Statement was filed involving a dispute between Ievolve, Inc., and Gerald E. Hickson, for Commercial Division in the District Court of Erie County.

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FILED: ERIE COUNTY CLERK 04/27/2023
11/30/2022 09:32
06:11 AM
PM INDEX NO. 804173/2020
NYSCEF DOC. NO. 112
71 RECEIVED NYSCEF: 04/27/2023
11/30/2022

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF ERIE
_________________________________________________

IEVOLVE, INC.,

Plaintiff, Index No. 804173/2020

v. AFFIDAVIT OF
DAVID MELLER
GERALD E. HICKSON,

Defendant.
_________________________________________________

STATE OF NEW YORK )
) SS:
COUNTY OF ERIE )

David Meller, being duly sworn, deposes and says:

1. I am the founder and Chief Executive Officer of Plaintiff IEvolve, Inc.

d/b/a I-Evolve Technology Services (“I-Evolve”).

2. I submit this affidavit (1) in support of I-Evolve’s cross-motion for

sanctions based on Defendant Gerald E. Hickson’s (“Defendant”) spoliation of evidence,

and (2) in opposition to Defendant’s motion to quash subpoenas, dismiss the Complaint,

and extend the discovery deadline for six months.

A. The Employment Agreement

3. I-Evolve is an IT services company that provides network, phone,

internet, cloud, and other IT services to businesses.

4. In December 2014, I-Evolve purchased substantially all of the assets of

Defendant’s former business, P.C. Business Solutions, Inc. (“PC Business”), including its

customer lists, pursuant to an Asset Purchase Agreement (“APA”).

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5. In connection with the APA, I-Evolve also employed Defendant as a

Senior Technology Consultant pursuant to an Employment Agreement, dated January 1,

2015. A copy of the Employment Agreement is attached as Exhibit A.

6. The Employment Agreement provides that Defendant “shall devote all

of his professional time and effort to the business and affairs of [I-Evolve] and shall perform

his duties faithfully, diligently and to the best of his ability.” Id. § 3.

7. The Employment Agreement also contains restrictions with respect to

Defendant’s use of I-Evolve’s confidential information, a non-solicitation provision, and a

non-competition provision. Id. §§ 6, 7. In particular, the it provides:

For a period of twelve (12) months from and after (a) the
termination of this Agreement for any reason whatsoever or (b)
the expiration of this Agreement, Employee agrees that he will
not directly or indirectly whether as owner, partner, investor,
consultant, agent, employee or otherwise: (a) contact or solicit
any customer of the Company with which Employee has or had a
relationship to enter into any business relationship with any
person, firm or entity other than the Company; (b) solicit or
accept the business of any customer of the Company with which
Employee has or had a relationship while an employee of the
Company; or (c) recruit, offer employment to, employ, engage as a
consultant, lure or entice away, or in any other manner persuade or
attempt to persuade, any person who is an employee of the
Company to leave the employ of the Company. The time period
during which the restrictions set forth in this Section 7 apply
shall be extended by the length of time during which Employee
violates any of the covenants contained in this Section 7.

Id. § 7 (emphasis added).

8. Section 5 of the Employment Agreement provides that it could be

terminated for Cause for, among other reasons:

(ii) Employee shall commit any act of fraud upon, or willful
misconduct toward, the Company;

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(iii) Employee shall engage in conduct which has been or is
likely to be materially injurious to the Company and Employee
shall fail to cure such conduct within fifteen (15) days after
written notice by the Company to Employee;

(iv) there shall be a failure by Employee (other than by
reason of his illness or incapacity) to substantially perform the
duties and obligations imposed upon Employee under this
Agreement and Employee shall fail to cure such failure within
fifteen (15) days after written notice by the Company to
Employee; or

(v) the continued failure by Employee to substantially
perform any of the duties set forth in Section 3 (other than a failure
resulting from the Employee’s incapacity due to injury or
illness) and Employee shall fail to cure such failure within
fifteen (15) days after written notice by the Company to
Employee.

Id. § 5(b) (emphasis added).

9. In addition, Defendant signed an Employee Handbook. A copy of

the Employee Handbook is attached as Exhibit B.

10. The Employee Handbook provides, in relevant part:

During the employment term of an employee and for one year
(12 months) following such employment term, [Defendant]
shall not engage in any activities (directly or indirectly) in
competition with I-Evolve; induce or solicit (directly or indirectly)
any employee to leave the employment of I-Evolve, or use the
information or products of I-Evolve to develop, promote,
advertise, market, or provide any information, products, or services
similar to or in competition with I-Evolve.

Id. § 7.13 (emphasis added).

B. Defendant Breached the Employment Agreement
and His Duties to I-Evolve as an Employee

11. In violation of his Employment Agreement and his duty of loyalty to

I-Evolve as his employer, Defendant continued to operate PC Business, his former

competing IT services business, while employed by I-Evolve.

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12. Among other actions, Defendant improperly solicited and serviced

I-Evolve customers under the name PC Business and using his former PC Business email

address. For instance, on May 22, 2018, Defendant sent an invoice to I-Evolve customer

Moses Insurance Group under PC Business for Sophos cybersecurity services. A copy of

this May 2018 invoice, produced by Moses Insurance Group in response to a subpoena

issued by I-Evolve, is attached as Exhibit C.

13. Notably, the address on this May 2018 invoice from PC Business was

Defendant’s home address. Id. Further, at the time of this invoice, Defendant was

employed by I-Evolve and I-Evolve offered the same Sophos services.

14. From at least 2017 to 2019, I-Evolve received numerous complaints

from its customers and its employees who were unhappy with Defendant’s job performance.

An excerpt of Defendant’s employee file is attached as Exhibit D.

15. For instance, on September 20, 2017, an I-Evolve employee submitted

a formal complaint explaining, in part:

Jerry Hickson’s lack of respect and poor communication has
caused increased frustration throughout the Admin Team. On
multiple occasions, he has gone against set processes which
caused increased work and intervention from members of our
team. Additionally, he lacks communication skills and ignores
emails and calls both from customers and I-Evolve employees.
He screens calls from the office and is unable to receive
voicemails because his voicemail box is full on his cell phone.
In the rare occasion that he does respond, the response is
extremely rude and unprofessional.

Id. at I-EVOLVE_000102.

16. As another example, in December 2017, I-Evolve received a customer

complaint, where the customer “expressed their ‘extreme’ displeasure and unhappiness with

how their account is being managed by Jerry Hickson . . . . They would like to NOT work

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with Jerry any further . . . . He does not want his company to deal with Jerry at all. He

expressed his satisfaction with I-Evolve as a whole and that they plan on staying with us, as

long as Jerry is not involved.” Id. at I-EVOLVE_000116.

17. I-Evolve provided Defendant with multiple warnings and directives

concerning various employee performance issues and willful misconduct including

(a) Defendant’s use of his PC Business email to communicate with I-Evolve customers;

(b) Defendant’s sale of unapproved products and services to customers; (c) Defendant’s

failure to respond to customer requests or return customer emails or calls; (d) Defendant’s

failure to communicate with team members or attend team meetings and trainings;

(e) Defendant’s rude and unprofessional behavior towards customers and team members;

(f) Defendant’s insubordinate behavior towards I-Evolve management; and (g) Defendant’s

failure to comply with I-Evolve policies and procedures regarding customer quotes and

sales. Id. at I-EVOLVE_000102-187. Defendant failed to cure this improper conduct

despite repeated written warnings from I-Evolve. Id.

18. For example, I-Evolve repeatedly warned Defendant to cease using his

“@pcbusiness.com” email address to communicate with I-Evolve customers:

September 19, 2018: “It has come to my attention that . . . you
have been using @pcbusiness.com email to conduct I-Evolve
business. You are to immediately stop using that email (and
any derivative email thereof) when communicating with/to
I-Evolve customers AND while you are under the employ of
I-Evolve.” Id. at I-EVOLVE_000161.

November 26, 2018: “Once again, please stop using
jerryh@pcbusiness.com, ihicksonPocbusiness.com,
jerry@pcbusiness.com or any derivative thereof when
conducting I-Evolve business (See 8/8/18 email).”
Id. at I-EVOLVE_000163.

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November 30, 2018: “Why are you sending me an email from
@pcbusiness.com when I politely, respectfully and explicitly
told you to stop as recent as earlier this week? . . . STOP using
@pcbusiness.com while conducting I-Evolve business.”
Id. at I-EVOLVE_000165.

19. Defendant also breached his Employment Agreement and his duty of

loyalty to I-Evolve by soliciting I-Evolve employees to leave the company and join his

competing IT services business. See, e.g., at I-EVOLVE_000190, 198 (notes and memo to

file regarding Defendant soliciting I-Evolve employees).

20. On July 15, 2019, Defendant’s employment with I-Evolve was

terminated for Cause pursuant to Section 5(b) of the Employment Agreement. Id. at

I-EVOLVE_000200.

21. The following day, I-Evolve’s counsel sent Defendant a letter to

remind him of his continuing obligations to I-Evolve following termination, including his

non-compete obligations under Section 8.13 of the I-Evolve Employee Handbook and non-

solicitation obligations under Section 7 of his Employment Agreement, and providing

copies of those documents. Id. at I-EVOLVE_000208-210.

22. On August 12, 2019, I-Evolve’s counsel sent another letter to

Defendant demanding his return of I-Evolve confidential and proprietary information,

including a “One Note” file containing network information, credentials, and passwords for

various I-Evolve customers, which Defendant had refused to return after his termination.

Id. at I-EVOLVE_000211-212, 214.

23. In further violation of his Employment Agreement, during the twelve-

month period following the termination of his employment for Cause, Defendant solicited

I-Evolve customers and/or accepted the business of I-Evolve customers. For instance,

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Defendant produced certain financial records from August 1, 2019 through May 4, 2021,

and those records show significant revenue from I-Evolve customers in the period following

his termination. A copy of those financial records are attached as Exhibit E.

C. Defendant’s Commission Reports and I-Evolve’s Sales Tool

24. The Employment Agreement provides that Defendant would be

compensated on a commission basis pursuant to the formula described on Exhibit A of the

Employment Agreement. See Exhibit A. The formula includes a 30% commission on the

“Gross Profit” for hardware, software, and equipment sales, with Gross Profit defined as

“the sales price minus cost of goods sold (as calculated in Quotewerks or other sales/quoting

software utilized by the Company). Id. (emphasis added). I-Evolve transitioned from using

Quotewerks as its sales tool to using ConnectWise as its sales tool around the time that the

parties executed the Employment Agreement.

25. Defendant received monthly commission reports which set forth, in

detail, the breakdown of his commissions based on the commission schedule set forth in

Exhibit A of the Employment Agreement. The commission reports contain (a) a summary;

(b) a detailed list of hardware and software sales, including the customer, quote number,

quoted price, Quotewerks/ConnectWise margin, commission rate, and commission

amount; (c) a detailed list of technical services, including the customer, description of

service, rate, commission rate, and commission amount; and (d) a detailed list of cloud

services, including the customer, description of service, rate, commission rate, and

commission amount. An example of Defendant’s monthly commission report for January

2018 is attached as Exhibit F.

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26. By way of example, the January 2018 commission report contains an

entry under “hardware & software” for the client “Marketing Tactics & Strategies.” With

respect to that sale, it provides “Quote #006085 Desktop & Laptop Options” for a quoted

price of $1,873.35; margin of $374.47; commission rate of 30%; and commission of $112.34.

A copy of Quote #006085 is attached as Exhibit G.

27. The “margin” for the commission calculation on Quote #006085 is

further reflected in I-Evolve’s ConnectWise sales tool. I-Evolve’s sales tool is integrated

directly and electronically with its products vendor, Ingram Micro. This means that when

I-Evolve submits a request for a quote to Ingram Micro in its sales tool, the request is

transmitted directly to Ingram Micro, and Ingram Micro then populates the sales tool with

the quoted cost for I-Evolve. The ConnectWise sales tool then calculates the customer sales

price and gross profit for the sale, taking into account a standard mark-up. There is no

“paper” record for the gross profit calculation of the quoted sale, and information from

Ingram Micro is transmitted directly and electronically to I-Evolve’s ConnectWise sales

tool. An export from I-Evolve’s ConnectWise sales tool for all of Defendant’s sales,

produced by I-Evolve, is attached as Exhibit H.

28. Pursuant to Exhibit A of the Employment Agreement, Defendant’s

commission for hardware, software, and equipment sales was calculated by I-Evolve based

on the “Gross Margin” in I-Evolve’s ConnectWise sales tool on the date that the quote was

generated by Ingram Micro. Defendant’s counsel therefore incorrectly claims that I-Evolve

did not produce the back-up information and documentation for Defendant’s monthly sales

reports, as required by the Court’s April 5, 2022 Order. Doc. No. 55 ¶¶ 37-39.

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Case Info

Judge

Emilio Colaiacovo Track Judge’s New Case

Case No.

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Document Filed Date

April 27, 2023

Case Filing Date

March 18, 2020

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Party Statement: Ievolve, Inc. v. Gerald E. Hickson

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