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Merck & Co. v. Biorganic Laboratories Inc.

Decided: February 10, 1965.


Matthews, J.s.c.


In this proceeding plaintiff Merck & Co., Inc. (hereinafter Merck) seeks an order compelling defendants Sharff and Salb to answer certain questions propounded to them on depositions.

In its complaint plaintiff alleged that defendants induced former employees of Merck, including one Osborne, to give and disclose Merck trade secrets, know-how, micro-organisms and other property, all pertaining to the manufacture of Vitamin B[12], to persons engaged in the Italian Pharmaceutical Industry, including but not limited to defendants and Ankerman-Italiana, S.p.A. Plaintiff also alleged that the above activities constituted a conspiracy; that defendants owned a financial interest in Ankerman-Italiana, S.p.A., and that defendants acted maliciously, wrongfully and deliberately to cause interference with Merck's contractual relationships with its employees, to cause breach of fiduciary relationships, and, further, to cause unfair competition, conversion of Merck's property and unjust enrichment. The relief demanded included an accounting and return of all profits and earnings by defendants to Merck, injunctive orders, and compensatory and punitive damages.

Initially, depositions were taken of Sharff and Salb on the issues of liability. Meaningful discovery was successfully frustrated by activities of defendants, by refusal to answer and the destruction of documents. The issues of liability have now been substantially eliminated from the case by an order of this court, entered December 14, 1962, which struck defendants' answer, entered a default against them, and directed plaintiff to proceed pursuant to R.R. 4:56-2(b). That order was affirmed by the Appellate Division in an opinion reported in 82 N.J. Super. 86 (App. Div. 1964).

After the issuance of the mandate on affirmance, plaintiff served defendants Sharff and Salb on January 21 and January 22, 1964 with notice that their oral depositions would be taken on February 3, 1964 as to the issues of damages. A deposition session was finally conducted on April 2, 1964, and again on August 11, 1964. In each instance the individual defendants refused to answer questions propounded to them, invoking the privilege against self-incrimination.

Plaintiff now contends that Sharff and Salb, having heretofore on July 27 and September 10, 1962 voluntarily appeared and testified on the merits of this action in depositions, should now be regarded as having effectively waived their rights to invoke the privilege.

There can be no dispute but that at the deposition sessions of July 27 and September 10, 1962 both individual defendants testified as to various areas concerning the substantive merits of this action. Thus, in his testimony on July 27, Salb described the nature of defendants' business, some of their dealings with Osborne, knowledge concerning Merck B[12] information possessed by Osborne or Ankerman, knowledge of Osborne's and Ankerman's dealings, trips to Ankerman by defendants and Osborne, B[12] discussions by defendants, and B[12] work at Ankerman. In the September 10, 1962 session, Sharff discussed documents concerning dealings between defendants, Ankerman and Osborne, and the interest of defendants in Ankerman-Italiana. These are the matters which it is claimed constitute testimony by defendants on the merits in the action and, therefore, constitute an effective waiver of any claim of the privilege each may otherwise have had to remain silent.

In the further support of its argument for the order sought here, plaintiff cites N.J.S. 2A:84A-19 (Rule 25), specifically subsection (d) thereof, which reads:

"Subject to Rule 37, every natural person has a right to refuse to disclose in an action or to a police officer or other official any matter that will incriminate him or expose him to a penalty or a forfeiture of his estate, except that under this rule:

* * *

(d) subject to the same limitations on evidence affecting credibility as apply to any other witness, the accused in a criminal action or a party in a civil action who voluntarily testifies in the action upon the merits does not have the privilege to refuse to disclose in that action, any matter relevant to any issue therein."

This rule, it is contended, in view of defendants' voluntary appearance and testimony as to matters concededly embraced within the merits of this action, compels a finding that they have created an effective waiver of their rights to invoke the privilege against self-incrimination.

It should also be mentioned at this juncture that on the occasion of the deposition sessions of July 27 and September 10, 1962, both Sharff and Salb in several instances consistently refused to answer what might have been regarded as patently relevant questions, on the ground that they were irrelevant and immaterial; in no instance was the privilege against self-incrimination invoked by either defendant; further, it should be observed, suggestions that the right to invoke the privilege was being retained by each may be found in the deposition record.

In answering these arguments defendants point out that at the time they appeared at the office of plaintiff's attorneys for deposition purposes, Sharff was already under federal indictment in the Southern District of New York, and that, subsequently, a second indictment was returned against him in the same jurisdiction. The latter indictment also included Salb as a defendant. While it is conceded that the indictments in question do not refer to plaintiff herein, the second indictment does charge, in numerous counts, both Sharff and Salb (together with several other named defendants) with having entered into a conspiracy to transport, and actually having transported, certain quantities of micro-organisms and quantities of other drug products from one state to ...

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