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Hollander v. Imperial Fur Blending Corp.

Decided: May 16, 1949.

A. HOLLANDER & SON, INC., COMPLAINANT-APPELLANT,
v.
IMPERIAL FUR BLENDING CORPORATION, PHILIP A. SINGER, RICHARD VILLANI AND ROBERT CARUBA, DEFENDANTS-RESPONDENTS



On appeal from the former Court of Chancery.

For reversal -- Chief Justice Vanderbilt, and Justices Case, Heher, Wachenfeld, Burling and Ackerson. For affirmance -- None. The opinion of the court was delivered by Wachenfeld, J.

Wachenfeld

Appellant instituted suit to enforce the terms of an employment contract containing various restrictive covenants and to obtain redress for the use by respondents of its secret processes and formulae. The court below, on the merits of the case, found the contract valid and breached by the conduct of Singer, in which the other respondents participated, but dismissed the bill for the sole reason that shortly after filing, appellant had inserted an advertisement in a trade publication advising of the pendency of the suit and the possibility of action against all persons doing business with the respondent company. The relief to which the appellant was otherwise entitled, as ascertained by the court below, was therefore forfeited. Appeal is taken from the dismissal so made and there are cross-appeals challenging the finding of the court on the merits.

The Hollander Corporation and its predecessor, a Hollander family enterprise, have been engaged in the business of processing, dyeing and blending raw furs or skins for over fifty years, having treated every kind of fur except long-haired

furs such as fox and wolf, and claim to be the largest in the field. As to what furs were processed depended upon the then prevailing styles. Operating many plants besides the one in New Jersey and, until the past war, in foreign countries as well, it does business generally throughout the United States. Its processes and formulae were developed by experimentation or acquired by purchase and in many cases are secret and confidential.

The respondent Philip A. Singer is a grandson of the Hollander who originally established appellant's business and admittedly is a skilled dyer and dresser of furs. Prior to 1939 he owned and operated a fur dyeing and dressing business under the firm name of Philip A. Singer & Bro., Inc. During that period the appellant successfully instituted proceedings against the corporation for trade-mark infringement. A. Hollander & Son, Inc., v. Philip A. Singer & Bro., Inc., 119 N.J. Eq. 52 (Ch. 1935); affirmed, 120 N.J. Eq. 76 (E. & A. 1936).

In 1939, after the Singer Company went bankrupt, he approached the appellant for work and was employed as a dresser and dyer of furs and as manager of the Long Branch plant, which had been closed for several years. The employment contract was made on February 10, 1940, for a term ending December 31, 1944, at an annual salary of $7,500.

In paragraph 2 of the agreement Singer covenanted that during the term of employment he would faithfully perform his duties and would not divulge to any person outside the corporation any of the trade secrets or processes and not use them for profit to himself or another. The employer was to be the sole owner of all experiments and discoveries by Singer of any shades of color, new formulae, processes and working methods used in the dressing and dyeing of fur skins, and such discoveries were to be turned over to the employer and not otherwise disclosed by the employee. This provision was made applicable and in effect even though the experiments were made by the employee outside of working hours fixed by the employer and outside of the place of employment furnished by the employer.

By the terms of paragraph 3 Singer agreed to serve the employer exclusively and not engage directly or indirectly in any other business during the term of employment.

Paragraph 4 contained a covenant that the employee, for a two-year period ensuing upon termination of employment, would not "directly or indirectly * * * engage in or be employed in any branch of the fur dressing or fur dyeing industry" in any state east of the meridian passing through St. Louis, Missouri, listed severally and separately, an area specifically declared to be "required for the adequate protection" of the employer's business.

In paragraph 8 the employer reserved the right, upon one week's notice, "to suspend at any time and from time to time the performance by the employee of the latter's active duties hereunder." The salary, however, was to continue during suspension and the employee was not to engage "in any business or commercial enterprise of any kind or description."

As manager of the Long Branch plant Singer was entrusted with the appellant's Master and Current Formulae books. He conducted the business of the plant at a loss. In 1942, two years after commencing the employment, Singer tried to persuade Louis Hollander, a dyer and dresser employed by the appellant, to join him in an attempt to buy out the Long Branch plant and to go into business there but the latter refused.

In December, 1942, he secretly organized a competing company, the Imperial Fur Blending Corporation, starting operations in March, 1943, in Long Branch to process furs. The stock in the corporation was distributed twenty-five per cent to Sol Hordoff, twenty-five per cent to Richard Villani and fifty per cent to Robert Caruba.

Villani, the president and manager of the plant, had formerly been superintendent of Singer's own plan but was not experienced as a dyer and dresser of furs. When Singer became manager of appellant's plant, he employed Villani, who was given access to the dye house and to the formulae books kept in Singer's possession. He was under Singer's tutelage and as a result Villani obtained sufficient technical knowledge

of the business to subsequently operate Imperial's plant. Singer kept in telephone communication with Villani but did not appear at Imperial's plant for fear of disclosing his interest in the competing company at the time he was on Hollander's payroll.

Caruba, a certified public accountant, had been similarly formerly employed by Singer as an accountant for his old firm and as a stockholder in Imperial was nothing more than the alter ego of Singer, who paid for the stock taken in Caruba's name. Control over the Hordoff stock was retained by Singer through an option to purchase whereby he obtained first right to acquire in the event of sale.

In January, 1943, Singer requested Hollander Corporation to release him from his contract, at the same time expressly denying any connection with Imperial. The request was turned down. Officers of the appellant corporation became suspicious of Singer's relationship with the newly formed Imperial Company and suspended him under the terms of the contract, placing Charles Russell, an experienced practical dyer, as manager of the plant. Russell asked Singer for the formulae books which he had removed from the plant but they were never returned. Singer tried to persuade Russell to enter the fur dyeing and dressing business with him but Russell declined. Upon the change of management the Long Branch plant operated at a profit.

Singer did not relinquish his control of the Imperial Company, as shown by the appearance of his notations on the company records. By various subterfuges, until he openly took over Imperial, he siphoned off funds of the company. In 1943 he developed a new shade of dyed fur which he did not disclose to the appellant but diverted to Imperial. This development proved to be far superior to that used by the appellant. In the same year, at the expense of Imperial, he traveled to Canada for the purpose of opening a branch plant there but the plan was discarded.

In February, 1944, the Hollander Corporation filed a bill against Singer and the Imperial Corporation but before hearing it was dismissed without ...


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