United States District Court, D. New Jersey
June 1, 2005.
CENTRAL LEWMAR, L.P., Plaintiff,
THOMAS J. GENTILIN and MESA LABEL L.L.C., Defendants.
The opinion of the court was delivered by: JOHN BISSELL, Chief Judge, District
This case is before the Court on a motion by plaintiff Central
Lewmar, L.P. ("Central Lewmar") for partial summary judgment
pursuant to Fed.R.Civ.P. 56(c). This Court has jurisdiction
over this matter pursuant to Title 28 U.S.C. § 1332. FACTS
Plaintiff Central Lewmar, a New Jersey limited partnership
based in Newark, New Jersey, is principally engaged in the
distribution of paper products. (See Compl., ¶ 1). Defendant
Thomas J. Gentilin ("Mr. Gentilin"), currently residing in
Colorado, was employed by Central Lewmar as a Vice President of
Sales and as a sales agent. (See id., ¶¶ 1, 6). Defendant
Mesa Label, L.L.C. ("Mesa Label") is a Colorado limited liability
corporation with its principal place of business in Colorado.
(See id., ¶ 3). Mr. Gentilin is the sole owner and principal
of Mesa Label. (See id.)
While employed by Central Lewmar, Mr. Gentilin sold printable
adhesive labels. (See Plaintiff's Statement of Uncontested
Facts ("Plaintiff's SUF"), ¶ 6). On or about January 28, 1999, he
solicited and obtained Wilmar Industries, Inc. ("Wilmar") as an
account and customer for Central Lewmar. (See id.)
Mr. Gentilin's employment with Central Lawmar ended on March
14, 2003. (See id., ¶ 2; see also Defendants' Response to
Plaintiff's SUF (admitting ¶¶ 1-10)). While employed, Mr.
Gentilin had received compensation and other benefits of
employment from Central Lewmar. (See Plaintiff's SUF, ¶ 4).
According to Central Lewmar, Mr. Gentilin incorporated Mesa
Label while he was still employed by Central Lewmar. (See
id., ¶ 11). Furthermore, plaintiff contends that while he was so
employed, Mr. Gentilin solicited and obtained the Wilmar account
for Mesa Label and away from Central Lewmar. (See id., ¶ 12).
On October 1, 2003, Central Lewmar filed in this Court a
seven-count Complaint against Mr. Gentilin and Mesa Label
(collectively "defendants"). On November 10, 2004, this Court
granted defendants' motion to amend their Answer. (See Central
Lewmar, L.P. v. Thomas J. Gentilin and Mesa Label, LLC, Civil
03-4671 (Order) (GDH). The Amended Answer, filed on November 19,
2004, contained counterclaims against Central Lewmar for (1)
breach of contract, (2) breach of the covenant of good faith and
fair dealing, and (3) unjust enrichment. (See Am. Answer at
On January 24, 2005, Central Lewmar filed the current motion
for a partial summary judgment, as to liability only, on three
counts in the Complaint: Count Two (breach of the duty of
loyalty); Count Three (intentional interference with prospective
economic advantage); and Six (unjust enrichment). Defendants
respond that the motion for summary judgment should be denied or
continued pursuant to Fed.R.Civ.P. 56(f). (See Defendants'
Br. at 7). DISCUSSION
I. Standard for a Rule 56(c) Motion for Summary Judgment
Federal Rule of Civil Procedure 56(c) provides that summary
judgment should be granted "if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law." Fed.R.Civ.P. 56(c); see also
Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986);
Kreschollek v. Southern Stevedoring Co., 223 F.3d 202, 204 (3d
cir. 2000). In deciding a motion for summary judgment, a court
must construe all facts and inferences in the light most
favorable to the nonmoving party. See Boyle v. Allegheny
Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998). The moving party
bears the burden of establishing that no genuine issue of
material fact remains. See Celotex Corp. v. Catrett,
477 U.S. 317 (1986).
The Supreme Court has stated that in evaluating a defendant's
motion for summary judgment:
[t]he judge must ask . . . not whether . . . the
evidence unmistakably favors one side or the other
but whether a fair-minded jury could return a verdict
for the plaintiff on the evidence presented. The mere
existence of a scintilla of evidence in support of
the plaintiff's position will be insufficient; there
must be evidence on which the jury could reasonably
find for the plaintiff. The judge's inquiry,
therefore, unavoidably asks whether reasonable jurors
could find by a preponderance of the evidence that
the plaintiff is entitled to a verdict. . . .
Anderson, 477 U.S. at 252. A fact is "material" only if it will
affect the outcome of a lawsuit under the applicable law, and a
dispute over a material fact is "genuine" if the evidence is such
that a reasonable fact finder could return a verdict for the
nonmoving party. (See id.)
In order to survive a motion for summary judgment, a plaintiff
must present more than a mere scintilla of evidence in his favor.
(Id.) He "cannot simply reallege factually unsupported
allegations contained in his pleadings." Anderson,
477 U.S. at 249; see also Clark v. Clabaugh, 20 F.3d 1290, 1294 (3d
Cir. 1994). Only evidence that would be admissible at trial may
be used to test a summary judgment motion; evidence with a
deficient foundation must be excluded from consideration. See
Blackburn v. United Parcel Service, Inc., 1999 WL 360546 (3d
II. The Parties' Arguments
According to Central Lewmar, "Mr. Gentilin inequitably
solicited, diverted and converted for his own benefit, Central
Lewmar's thermal label business with Wilmar ?, a former customer
of Central Lewmar." (See Plaintiff's Br. at 1). Moreover,
Central Lewmar argues that "relevant admissions by defendant
Gentilin clearly establish that Central Lewmar is entitled to
summary judgment in its favor as a matter of law, and no genuine issue of material fact exists which could reasonably preclude the
entry of that judgment." (See id. at 8).
In response, defendants argue that the motion for summary
judgment should be denied or, in the alternative, continued
pursuant to Fed.R.Civ.P. 56(f) because questions of fact exist
and discovery is incomplete. (See Defendants' Br. at 7).
Furthermore, defendants argue that Central Lewmar's motion with
regard to the unjust enrichment claim must be denied because
defendants plan to present an affirmative defense of "unclean
hands." (See id. at 7-8). Defendants also allege that Central
Lewmar materially breached its agreement with Mr. Gentilin;
therefore, he is relieved of his obligations under the agreement.
(See id. at 9). For that reason, defendants argue that Central
Lewmar's motion for summary judgment on the breach of the duty of
loyalty claim must be denied. (See id.) Lastly, defendants
argue that summary judgment is inappropriate with regard to
Central Lewmar's claim for tortious interference with prospective
economic advantage because there are material issues of fact as
to Mr. Gentilin's intent. (See id. at 11). Specifically,
defendants contend that "the terms of Central Lewmar's Employee
Handbook clearly raise the question of whether Gentilin's actions
were prohibited at all." (Id.) For these reasons, defendants
argue that Central Lewmar's summary judgment motion should be
denied. III. Analysis
This case has been brought pursuant to Title 28 U.S.C. § 1332,
under diversity jurisdiction. As such, this Court must apply the
substantive law of the State of New Jersey. See Tarsio v.
Provident Ins. Co., 108 F. Supp. 2d 397, 401 (D.N.J. 2000).
A. Breach of the Duty of Loyalty
Under New Jersey law, "[a]n employee owes a duty of loyalty to
the employer and must not, while employed, act contrary to the
employer's interest." Chernow v. Reyes, 239 N.J. Super. 201,
204 (App.Div.), certif. denied, 122 N.J. 184 (1990).
Specifically, while employed, an "employee has a duty not to
compete with the employer's business." (Id., quoting United
Board & Carton Corp. v. Britting, 63 N.J. Super. 517, 524 (Ch.
Div. 1959), aff'd, 61 N.J. Super. 340 (App.Div. 1960),
certif. denied, 33 N.J. 326 (1960)). Furthermore, it is a
breach of an employee's duty of loyalty to solicit customers or
potential customers of an employer or to perform comparable
competitive acts. See Auxton Computer Enterprises, Inc. v.
Parker, 174 N.J. Super. 418, 423-24 (App.Div. 1980) ("[An
employee] may not solicit his employer's customers for his own
benefit before he has terminated his employment. Nor may he do
other similar acts in direct competition with the employer's
In this case, Mr. Gentilin owed a duty of loyalty to Central
Lewmar because he was an employee. While Mr. Gentilin had the right to make preparations to start a competing business, he
could not breach his duty of loyalty when doing so. See
Lamorte Burns & Co. v. Walters, 167 N.J. 285, 303 (2001)
("[A]lthough an employee has the right to make preparations to
start a competing business, the employee may not breach the
undivided duty of loyalty he or she owes to his or her employer
while still employed by soliciting the employer's customers or
engaging in other acts of secret competition.")
Defendants argue that because Central Lewmar breached its
agreement with Mr. Gentilin, he was relieved of his obligations
under the duty of loyalty. (See Defendants' Br. at 9).
According to defendants, "Central Lewmar has breached the express
binding terms of [the Employee Handbook and Sales Compensation
Program] by failing or refusing to pay . . . sums properly due
Defendants' argument must fail. Under New Jersey law, "where
the counter-promise to perform relates to a material matter, the
disappointed party has the right to rescind the contract."
Giumarra v. Harrington Heights, 33 N.J. Super. 178, 190 (App.
Div. 1955). The materiality of the breach is a crucial element.
(See id.) Mr. Gentilin claims that he was "shorted" and
"taken advantage of" because of errors by Central Lewmar
regarding his compensation. (See Gentilin Dep. at 48-49). The
only basis for this claim is Mr. Gentilin's belief that he "didn't catch everything": meaning he did not catch all of
Central Lewmar's possible mistakes regarding compensation so that
he was able to be reimbursed by Central Lewmar. (See id. at
56). This breach, if true, still does not rise to the level of a
material matter permitting Mr. Gentilin to be relieved of his
duty of loyalty. Mr. Gentilin was an at-will employee who owed
Central Lewmar the requisite duty of loyalty. Mere mistakes in
compensation that could have been rectified had Mr. Gentilin
"caught everything" cannot be considered material. For that
reason, defendants' argument that Mr. Gentilin was relieved of
his duty of loyalty must fail.
Hence, Central Lewmar has established the necessary elements of
its claim that Mr. Gentilin breached his duty of loyalty. Based
on Mr. Gentilin's own admissions, he solicited a customer of
Central Lewmar and proceeded to take that business for himself.
(See Gentilin Dep. at 66-69). According to Mr. Gentilin, there
is no doubt that he began conducting business with Wilmar in
competition with Central Lewmar while he was working for Central
Lewmar. (See id. at 116). Based on these admissions, there is
no material issue of fact as to whether Mr. Gentilin breached his
duty of loyalty to Central Lewmar. For that reason, summary
judgment in favor of the plaintiff will be entered on Count Two
of the Complaint. B. Intentional Interference with Prospective Economic
The Supreme Court of New Jersey had identified four elements
that are required for a party to make out a prima facie case
for the tort of intentional interference with a prospective
economic advantage: (1) a reasonable expectation of economic
advantage to plaintiff, (1) interference done intentionally and
with "malice," (3) causal connection between the interference and
the loss of prospective gain, and (4) actual damages. See
Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739,
750 (1989); see also Varrallo v. Hammond, Inc., 94 F.3d 842,
848 (3d cir. 1996). The reasonable expectation of economic
advantage to the plaintiff does not require a contractual right.
See Varrallo, 94 F.3d at 848. The malice requirement or this
tort does not constitute "ill will" but rather "it means that
harm was inflicted intentionally and without justification or
excuse." Lamorte, 167 N.J. at 306. The malice factor is
determined on an individual basis, under a flexible standard
where the court looks to the defendant's actions in the context
of the facts presented. (See id.; see also M. Eagles Tool
Warehouse, Inc. v. Fisher Tooling Co., Inc., 205 F. Supp. 2d 306
(D.N.J. 2002). According to the New Jersey Supreme Court:
Often it is stated that the relevant inquiry is
whether the conduct was sanctioned by the "rules of
the game," for where a plaintiff's loss of business
is merely the incident of healthy competition, there
is no compensable tort injury. The conduct must be injurious and
transgressive of generally accepted standards of
common morality or of law. The line is clearly drawn
at conduct that is fraudulent, dishonest, or illegal
and thereby interferes with a competitor's economic
Lamorte, 167 N.J. at 3036-307 (citations omitted).
Central Lewmar argues that all four elements of this tort have
been established in this case. First, plaintiff had a reasonable
expectation of economic advantage based on the previous orders
from Wilmar. It was reasonable for Central Lewmar to expect that
its business relationship with Wilmar would continue. Second,
Central Lewmar argues that Mr. Gentilin acted with the requisite
"malice" as defined under New Jersey law. According to Central
Lewmar, Mr. Gentilin's actions were intentional and do not fall
under any category of conduct that would be sanctioned by the
`rules of the game.' Third, Central Lewmar argues that "there is
more than a reasonable probability that Central Lewmar would have
continued to sell thermal labels to Wilmar but for Gentilin's . . .
solicitation of Wilmar's business." (See Plaintiff's Br. at
18). Lastly, Central Lewmar submits to this Court that it
suffered actual damages in the amount of at least $108,082.11 as
evidenced by the net profit that Mr. Gentilin gained through his
own business with Wilmar. (See id. at 19).*fn1
Defendants argue that the malice element has not been
established because Mr. Gentilin "was acting in accordance with
the terms of the employment agreement." (See Defendants' Br. at
11). According to defendants, Mr. Gentilin was acting within the
terms of his employment based on language in the Employee
Handbook that states: "Employees may hold outside jobs as long as
they meet with performance standards of their job with Central
Lewmar." (Id.) Yet, defendants overlook language in the
Employee Handbook that states: "Outside employment that
constitutes a conflict of interest is prohibited." (Id.) As
discussed previously, Mr. Gentilin's actions constituted a breach
of his duty of loyalty to Central Lewmar. It follows that this
"outside employment" constituted a conflict of interest,
particularly because it involved procuring a current client of
Central Lewmar. For these reasons, defendants' argument that Mr.
Gentilin was acting in accordance with the Employee Handbook
Furthermore, defendants argue that "[a]n employee who is not
bound by a covenant not to compete after the termination of
employment, and in the absence of any breach of trust, may anticipate the future termination of his employment and, while
still employed, make arrangements for some new employment by a
competitor or the establishment of his own business in
competition with his employer." (See Defendants' Br. at 12,
citing Auxton Computer Enterprises, Inc. v. Parker,
174 N.J. Super. 418, 423 (App.Div. 1980)). Yet, defendants fail to note
that the very next sentence in Auxton states: "The only
restriction to such action is that he may not solicit his
employer's customers for his own benefit before he has terminated
his employment. Nor may he do other similar acts in direct
competition with the employer's business."
174 N.J. Super. at 423. Hence, based on Auxton, it becomes clear that Mr.
Gentilin's actions stretched beyond the acceptable parameters for
seeking new employment or starting his own business. As such, Mr.
Gentilin's argument that he did not have the requisite malice
Defendants further argue that the third and fourth elements
have not been met because Wilmar would have given its business to
defendants after Mr. Gentilin left central Lewmar. "[T]he timing
of Mesa Label's dealings with Wilmar are [sic] irrelevant for
the purposes of these parts of the test, as Wilmar was leaving
Central Lewmar of its own free will in any event." (See
Defendants' Br. at 12). According to defendants, Central Lewmar
cannot prove causation and, therefore, cannot show damages. Under New Jersey law, contrary to defendants' claims, the
timing is relevant and Central Lewmar has proven causation.
Causation is demonstrated where there is proof that, absent the
alleged interference, there was a reasonable probability that the
victim of the interference would have received the anticipated
economic benefit. (See Lamorte, 167 N.J. at 306). As
previously discussed, Central Lewmar has a reasonable expectation
of an economic benefit. There was a reasonable probability that
Wilmar would have continued to purchase from Central Lewmar
absent defendants' actions.
For that reason, this Court agrees that all four elements have
been established by Central Lewmar, beyond any material dispute.
Hence, summary judgment as to Count Three of the Complaint,
intentional interference with prospective economic advantage, is
C. Unjust Enrichment
Under New Jersey law, to establish unjust enrichment, a
plaintiff must show both that defendant received a benefit and
that retention of that benefit without payment would be unjust.
See, e.g., VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554
(N.J. 1994); Associates Commercial Corp. v. Wallia,
211 N.J. Super. 231, 243 (App.Div. 1986); Russell-Stanley Corp. v. Plant
Industries, Inc., 250 N.J. Super. 478, 510 (Ch. Div. 1991). The
unjust enrichment doctrine requires that plaintiff show that it expected remuneration from the defendant at the time it performed
or conferred a benefit on defendant and that the failure of
remuneration enriched defendant beyond its contractual rights."
VRG Corp., 135 N.J. at 554. To recover under unjust enrichment,
Central Lewmar must prove that defendants received a benefit, and
that retention of the benefit without payment would be unjust.
See Associates Commercial Corp., 211 N.J. Super at 244.
Central Lewmar has met the burden to prove unjust enrichment.
Mr. Gentilin acquired profits from his dealings with Wilmar that
were above and beyond his compensation from Central Lewmar during
his employment with Central Lewmar. Moreover, that profit was at
Central Lewmar's expense.
Defendants, however, present the affirmative defense of
"unclean hands" in response to the unjust enrichment claim. This
affirmative defense must be addressed before this Court can rule
on the summary judgment motion regarding this claim.
1. Unclean Hands
The basic equitable maxim of unclean hands is that "[a] suitor
in equity must come into court with clean hands and he must keep
them clean after his entry and throughout the proceedings." A.
Hollander & Son, Inc. v. Imperial Fur Blending Corp.,
2 N.J. 235, 246 (1949); accord Johnson v. Johnson,
212 N.J. Super. 368, 384 (Ch. Div. 1986); Pollino v. Pollino,
39 N.J. Super. 294, 298-99 (Ch. Div. 1956). "In simple parlance, it merely gives expression to the equitable principle that a court
should not grant relief to one who is a wrongdoer with respect to
the subject matter in suit." Faustin v. Lewis, 85 N.J. 507, 511
(1981). While "[u]sually applied to a plaintiff, this maxim means
that a court of equity will refuse relief to [any] party who has
acted in a manner contrary to the principles of equity."
Johnson, 212 N.J. Super. at 384.
According to Mr. Gentilin, "Central Lewmar breached its
employment and compensation agreement with Gentilin by inflating
their base cost per unit of products, inaccurately calculating
commission percentages, and/or failing to factor in supplier
givebacks and incentives." (Defendants' Br. at 8). Defendants
argue that these "unclean" acts by Central Lewmar "were not only
a driving force in Gentilin forming Mesa Label, but go to the
very heart of any claims based upon commissions recoverable from
Wilmar sales." (Id.)
The unclean hands doctrine is applicable only to cases where
the particular claim is tied to inequitable conduct as an element
of its creation. See, e.g., Prudential Ins. Co. of America
v. Massaro, 2000 WL 1176541 (D.N.J. 2000) (stating that the
primary principle of the unclean hands rule is that the alleged
inequitable conduct must be connected, i.e., have a
relationship, to the matters before the court for resolution);
Lukaszewicz v, Lukaszewicz, 137 N.J. Eq. 383 (N.J. Ch. 1945).
According to the Supreme Court of the United States, courts should "apply the
maxim requiring clean hands only where some unconscionable act of
one coming for relief has immediate and necessary relation to the
equity that he seeks in respect of the matter in litigation."
Keystone Driller Co. v. general Excavator Co., 290 U.S. 240,
245 (1933). The Supreme Court further stated:
[Courts] do not close their doors because of
plaintiff's misconduct, whatever its character, that
has no relation to anything involved in the suit, but
only for such violations of conscience as in some
measure affect the equitable relations between the
parties in respect of something brought before the
court for adjudication. They apply the maxim, not by
way of punishment for extraneous transgressions, but
upon considerations that make for the advancement of
right and justice.
(Id.) Furthermore, a court that is assessing whether to invoke
the doctrine of unclean hands is not "bound by formula or
restrained by any limitation that tends to trammel the free and
just exercise of discretion." (Id. at 245-46).
In the instant case, defendants assert that the unclean hands
of Central Lewmar "go to the very heart" of the unjust enrichment
claim. However, Gentilin's contentions that Central Lewmar was
culpable in its actions regarding the base cost per unit of
products, and/or calculations of commission percentages, and/or
regarding supplier givebacks and incentives does not have any
immediate and necessary relation to the equity sought by Central
Lewmar in this action. Here, Central Lewmar attempts to prevent unjust enrichment because Mr. Gentilin received payment
from a Central Lewmar customer while still employed by Central
Lewmar. The alleged wrongdoings of Central Lewmar as cited by
defendants do not relate to Mr. Gentilin's actions of accepting
compensation from Wilmar while still in plaintiff's employ. For
that reason, defendants' contention that the "unclean hands"
affirmative defense precludes entry of summary judgment must
fail. Accordingly, Central Lewmar's claim for unjust enrichment
has also been sustained.
D. Defendants' Request for Continue the Motion for Summary
Judgment Pursuant to Fed.R.Civ.P. 56(f)
Defendants argue that Central Lewmar's motion for summary
judgment should at least be continued under Fed.R.Civ.P. 56(f)
pending additional discovery.
Absent a showing by defendants that denial of their motion to
extend discovery would deprive them of crucial evidence or would
result in fundamental unfairness, the Court has broad discretion
in deciding whether to permit additional discovery. Habecker v.
Clark Equip. Co., 942 F.2d 210, 218 (3d Cir. 1991); Wisniewski
v. Johns-Mansville Corp., 812 F.2d 81, 90 (3d Cir. 1987).
Furthermore, a party seeking to reopen discovery in response to a
summary judgment motion must demonstrate: (1) the particular
information sought; (2) how the information would preclude
summary judgment; and (3) why it has not previously been obtained. Pastore v. Bell Tel. Co. of Pa., 24 F.3d 508, 511 (3d
Cir. 1994) (quoting Dowling v. City of Philadelphia,
855 F.2d 136, 140 (3d Cir. 1988)).
Defendants have not met this standard. Defendants have not
noted the particular information sought. Rather, the defendants
argue that depositions of particular Central Lewmar employees
"could corroborate and further develop evidence concerning
defendants' counterclaims and affirmative defenses." (Defendants'
Br. at 6). According to Mr. Gentilin, these employees would
testify regarding "the costs being inaccurate." (Id.; see
also Gentilin Dep. at 41).
As discussed above, even if defendants could prove that Central
Lewmar had inaccurately calculated Mr. Gentilin's compensation,
this would not constitute a material breach directly connected to
the claims addressed in the present motion. Therefore, this
testimony would not change the outcome reflected in this
For these reasons, defendants' request that the motion for
summary judgment be continued under Fed.R.Civ.P. 56(f) pending
additional discovery is denied. CONCLUSION
For the foregoing reasons, plaintiff's motion for summary
judgment (on liability only) pursuant to Fed.R.Civ.P. 56(c),
as to Count Two of the Complaint (breach of duty of loyalty),
Count Three (intentional interference with prospective economic
advantage), and Count Six (unjust enrichment) is granted.