On appeal from the Superior Court of New Jersey, Law Division, Middlesex County.
Antell, Bilder and Arnold M. Stein. The opinion of the court was delivered by Arnold M. Stein, J.A.D.
Plaintiff appeals a non-jury verdict of no cause for action entered in favor of Angelo Reyes, his former employee, and Marc IV, Inc., Reyes' solely-owned corporation. We reverse because the soliciting and performance of competitive work during his employment constituted a breach by defendant Reyes of the implied covenant of loyalty and good faith owed to plaintiff, his employer.
Plaintiff is in the business of auditing telephone bills. An audit is first made to determine whether the customer's telephone equipment is in place, and is properly billed and in working order. Telephone bills are then checked against approved tariffs to see if there are any overcharges. Plaintiff usually receives 50% of all overcharge refunds returned to the customer by the telephone company.
On October 4, 1982, plaintiff employed defendant as an auditor. Defendant had been working as an equipment installer for New York Telephone Company where he became familiar with the equipment and services offered by telephone companies. Defendant had never previously engaged in auditing work. The agreement of hire was oral; no express restrictions against competition were imposed as a condition of employment. Defendant did not perform any sales work for plaintiff, who had a sales force which solicited prospective customers.
According to defendant, he became disenchanted with his employment prospects early in 1983. Plaintiff refused to renegotiate defendant's salary and showed no interest in defendant's suggestions to broaden the scope of the existing business. Defendant determined to make his livelihood elsewhere. His predeparture activities are the focus of this lawsuit.
Defendant continued to work for plaintiff until the week of July 12, 1983. The circumstances of his departure are in dispute. Plaintiff claims that he fired defendant because defendant did not cooperate with coemployees. Defendant claims that he quit or that the employment relationship ended by mutual agreement following a heated argument with plaintiff. The reasons plaintiff left are not important. What is important is what he did before he left.
Defendant first acquired sole ownership of a corporation which he had formed with others in December 1982. He then copied plaintiff's retainer agreement form for clients and the authorization letter permitting examination of the client's telephone company records. Defendant then solicited and performed telephone auditing services for several companies. All this was done, of course, without plaintiff's knowledge. Defendant's clandestine efforts resulted in his obtaining three auditing contracts and the performance of work for these companies before he left plaintiff's employ. He also solicited a fourth account, United Engineering Trustees (UET), during his employment with plaintiff, but performed no work for UET until after the employment ended.
The trial judge accepted defendant's testimony that he did not attempt to solicit any of plaintiff's customers. She also found that defendant did not slacken his work efforts for plaintiff during the regular 9 to 5 workday, and that defendant's soliciting and auditing activities were conducted at night and on weekends, lunch hours and vacation days. We see no reason to disturb these findings which are amply supported by
the record below. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 484, ...