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Merck & Co. v. Biorganic Laboratories Inc.

Decided: January 9, 1964.


Conford, Freund and Sullivan. The opinion of the court was delivered by Sullivan, J.A.D.


[82 NJSuper Page 87] Defendants, pursuant to leave granted by this court, appeal from an interlocutory order of the trial court striking the answer of all the defendants herein and entering a default as to all defendants.

Plaintiff is a New Jersey corporation engaged in the business of developing, producing and selling chemical and pharmaceutical products. Defendant Biorganic Laboratories, Inc., (Biorganic) is a closely held New Jersey corporation, the stock of which is owned by the individual defendants Nathan Sharff (Sharff) and Seymour Salb (Salb), and also by William Salb who is not a party to this suit. Sharff is president of Biorganic and Salb is treasurer.

In essence, this is a trade secret or secret processes suit, the gravamen of plaintiff's complaint being that defendants wrongfully obtained from certain of plaintiff's skilled employees secret and confidential information, knowledge and data belonging to plaintiff and used the same to defendants' own benefit. The suit seeks an accounting, damages and restraints.

After issue was joined, plaintiff commenced discovery proceedings. Such proceedings included attempts to take the deposition of the defendant Sharff. Plaintiff also sought the production of specified documents and records relating to Biorganic's operations. The record discloses a deliberate course of conduct by defendants and their counsel (not present counsel), the effect of which was to frustrate plaintiff's discovery. During the course of defendants' maneuvers plaintiff's counsel on several occasions spelled out orally and in writing the documents requested. Finally, when it became apparent that defendants were not acting in good faith, plaintiff served and filed a notice of motion to compel production, again specifically designating the items requested. The motion was originally returnable on September 21, 1962, but was adjourned to October 26, 1962, at defendants' request. On that date the trial judge, after hearing argument, orally directed defendants to produce the documents designated in plaintiff's motion. The court also directed defendant Sharff to answer the many questions which had been asked of him on deposition and which had not been answered. Counsel for defendants at that time advised the court that defendants would "avail ourselves of the right against self-incrimination"

to said questions. The formal order was ultimately signed on November 15, 1962.

Immediately after the court's oral order of October 26, 1962, plaintiff's counsel orally, by telephone, and by letter sought production of the documents in question. Defendants' counsel represented that they were being assembled and would be available in a short time. They were not produced, and plaintiff, on November 19, 1962, obtained an order directing defendants to show cause why their answer should not be stricken and why they should not be held in contempt. The order was returnable on November 30. On November 26, defendants' counsel in a telephone conversation with plaintiff's counsel stated that the documents were being brought to defendants' counsel's office the following day. Plaintiff's counsel was assured that he would be notified as soon as the documents arrived. No word having been received by the afternoon of November 28, plaintiff's counsel telephoned defendants' counsel and for the first time was told that there were no documents in existence which would be encompassed by the court's production order. On the same day defendants' counsel hand-delivered a letter to the same effect and stating that "affidavits setting forth the above" would be served.

On November 29 plaintiff's counsel was served with an affidavit executed by defendant Sharff which inter alia stated:

"6. Prior to this situation arising and as a result of the civil suits that were filed and the publicity attendant thereto and consequential loss of business, I was contemplating and had formulated a decision that Biorganic Laboratories, Inc., should go out of business.

7. On October 29, 1962, in accordance with this decision, I ceased to do business and discarded all back records of Biorganic Laboratories, Inc."

The following day, November 30, the return day of the order to show cause, plaintiff's counsel was served with an affidavit by defendant Salb stating that he had no "personal documents ...

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