March 27, 2008
GREGORY D'ALESSANDRO ENTERPRISES, INC. T/A NBS MARKETING, PLAINTIFF-RESPONDENT,
UNIVERSAL MARKETING GROUP, LLC, THOMAS COOPER, AND LOIS CLOUGH, DEFENDANTS-APPELLANTS, AND KRISTIN THOMPSON AND MARY LOU BRELOWSKI, DEFENDANTS.
On appeal from the Superior Court of New Jersey, Law Division, Morris County, Docket No. L-2415-05.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued February 5, 2008
Before Judges Skillman, Winkelstein and LeWinn.
Plaintiff NBS Marketing is a small marketing and sales company located in Montville that specializes in the food and grocery industry. Its clients typically include manufacturers and wholesalers of food and related products. As described by its principal, Gregory D'Alessandro, "NBS works with the client to develop a marketing strategy beneficial to that client, considering such factors as the client's competitors in the industry, details of the product, demographics, market share, an analysis of the price point at which a consumer might be interested in purchasing and trying a new product, the best way to deliver the product to the market and other related factors."
Defendants Thomas Cooper and Lois Clough were formerly employed by NBS Marketing as senior account managers. Cooper began his employment in July 2001, and Clough began her employment in November 2003. Neither Cooper nor Clough had a written employment contract.
Cooper terminated his employment with NBS Marketing on March 7, 2005, and Clough terminated her employment on April 1, 2005. After terminating their employment with NBS Marketing, both Cooper and Clough became employed by defendant Universal Marketing. According to D'Alessandro, approximately ten of NBS's twenty clients terminated their business relationship with NBS virtually simultaneously with the termination of Cooper and Clough's employment, and some of them subsequently became clients of Universal Marketing.
NBS Marketing filed this action in the Chancery Division against Cooper, Clough, Universal Marketing and others alleging misappropriation of confidential information, breach of the employee duty of loyalty, conversion, tortious interference with prospective economic advantage, tortious interference with contract, unjust enrichment and civil conspiracy. After the Chancery Division denied NBS's application for a temporary restraining order, the case was transferred to the Law Division. Upon the completion of discovery, NBS made a motion for partial summary judgment on its claims for breach of the duty of employee loyalty against Cooper and Clough and its claim of unjust enrichment against Universal Marketing.
The breach of the duty of loyalty claim against Cooper was based on the fact that Cooper performed certain services for Joseph Rutigliano & Sons, a former client of NBS Marketing, during February 2005, while he was still employed by NBS. The claim against Cooper was also based on the allegation that, while still employed by NBS, he arranged for one of NBS's clients, Washington Quality Foods,*fn1 to terminate its relationship with NBS and appoint Universal Marketing as its marketing representative. As damages for these alleged breaches of the duty of loyalty, NBS sought recovery of the salary paid to Cooper between January 1, 2005 and March 7, 2005, which totaled $16,670. It also sought the recovery of $1386.55 Rutigliano allegedly paid Cooper for services provided to Rutigliano during his employment by NBS.
The breach of the duty of loyalty claim against Clough was based on the fact that during her employment by NBS she also performed services, consisting of the calculation of commissions and preparation of "deal sheets," for Colonna, a manufacturer serviced by Worldwide, which is a company that provides the same services to dairy industry clients as plaintiff provides to grocery clients. This claim was also based on Clough's admission that while still employed by NBS, she disparaged the company to some of its existing clients. As damages for its breach of loyalty claim against Clough, NBS sought the recovery of the entire salary it paid to her during the period from January 1, 2004 to April 1, 2005. It also sought the recovery of the $45,000 Colonna and Worldwide paid Clough for services performed while she was employed by NBS.
NBS Marketing's unjust enrichment claim against Universal Marketing was based on an allegation that one of its former clients, Source One, paid Universal $7,925.99 for services performed by NBS.
Defendants filed untimely opposition to NBS's motion for partial summary judgment, which the trial court indicated it would consider. This opposition included excerpts of depositions in which Cooper testified NBS had voluntarily terminated its relationship with Rutigliano before he performed any services for Rutigliano on his own, and Clough testified that Colonna had terminated its relationship with NBS in 2003 and would not have resumed that relationship under any circumstances because of a "diverting issue" Colonna had with NBS and its principals' dislike of D'Alessandro.
Without conducting oral argument, the trial court granted NBS's motion for summary judgment in its entirety. Moreover, the court imposed joint and several liability against the defendants for the $164,732.55 claimed by NBS on its breach of employee loyalty and unjust enrichment claims.
Defendants filed a motion for reconsideration, which the court denied. Defendants subsequently filed a motion to amend the judgment to impose liability against each defendant individually rather than joint and several liability. The trial court denied this motion without issuing any opinion.
Before we address the merits of the appeal, several preliminary matters require discussion. First, the order from which this appeal has been taken granted only partial summary judgment in NBS's favor on its breach of employee loyalty and unjust enrichment claims, without disposing of NBS's other claims. Such an order is interlocutory and therefore not appealable as of right unless certified as final by the trial court in conformity with Rule 4:42-2. R. 2:2-3(a)(3); Golden Estates, Inc. v. Cont'l Cas. Co., 317 N.J. Super. 82, 87 (App. Div. 1998). The trial court did not so certify the order granting NBS partial summary judgment. However, the judgment entered in NBS's favor for $164,732.55 was "recorded as a lien" on September 1, 2006. Moreover, NBS undertook steps to execute upon the judgment, which led to entry of an order on February 27, 2007 compelling the posting of a supersedeas bond or a cash deposit in the amount of $165,000 as a condition of the withdrawal of all writs of execution and liens based on the judgment. Thus, it appears that the partial summary judgment has been treated as if certified as final under Rule 4:42-2 and therefore is appealable as of right.
We also note that the trial court granted NBS's motion for partial summary judgment without issuing any written or oral opinion. Rule 4:46-2(c) provides that in granting or denying a motion for summary judgment, "[t]he court shall find the facts and state its conclusions in accordance with R. 1:7-4," which requires such findings and conclusions to be set forth "by an opinion or memorandum decision, either written or oral." "Failure to perform that duty 'constitutes a disservice to the litigants, the attorneys and the appellate court.'" Curtis v. Finneran, 83 N.J. 563, 569-70 (1980) (quoting Kenwood Assocs. v. Bd. of Adj. of Englewood, 141 N.J. Super. 1, 4 (App. Div. 1976)). In granting NBS's motion for summary judgment, the court simply noted on the order, "for reasons set forth by plaintiff in the moving papers[,]" without issuing any form of opinion. Similarly, on the order denying defendants' motion to amend the judgment, the court simply entered a notation, "denied for reasons set forth in opposition." Such notations do not comply with the requirements of Rules 4:46-2(c) and 1:7-4. See Universal-Rundle Corp. v. Commercial Union Ins. Co., 319 N.J. Super. 223, 248 (App. Div.), certif. denied, 161 N.J. 149 (1999).
Moreover, NBS's brief in support of its motion for summary judgment does not set forth findings of fact and conclusions of law that could satisfy this judicial responsibility, even if they had been contained in a trial court opinion. That brief did not include any argument to support imposition of joint and several liability upon Cooper, Clough and Universal Marketing. The brief also did not contain any reasoned justification for assessing damages against Clough for the full amount of her salary during the entire period of her employment by NBS as well as the entire amount paid to her by Colonna. In addition, the brief failed to address Cooper's deposition testimony that his dealing with Rutigliano did not constitute a breach of his duty of employee loyalty because NBS had voluntarily terminated its business relationship with Rutigliano, or Clough's deposition testimony that her dealings with Colonna did not breach any duty of employee loyalty to NBS because Colonna had previously terminated its business relationship with NBS and would not have resumed that relationship under any circumstances. Therefore, the trial court's failure to make its own findings of fact and conclusions of law was not simply a technical failure to comply with the requirements of Rule 4:46-2(c) and Rule 1:7-4 but also reflected inadequate consideration of the issues presented by NBS's motion for partial summary judgment.
Despite the inadequacy of the trial court's consideration of NBS's motion, we have elected to consider the merits of the appeal rather than remanding for the required findings and conclusions of law. In reviewing an order granting summary judgment, we apply the same standard as the trial court in considering the motion. Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608 (1998). A motion for summary judgment may be granted only if "the pleadings, depositions, answers to interrogatories and admission on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact challenged and that the moving party is entitled to a judgment or order as a matter of law." R. 4:46-2(c). "An issue of fact is genuine only if, considering the burden of persuasion at trial, the evidence submitted by the parties on the motion, together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact." Ibid.; see Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 538-42 (1995). The claims on which NBS sought summary judgment against Cooper and Clough were for breach of the duty of employee loyalty. This duty "consists of certain very basic and common sense obligations[,]" including, most significantly, a prohibition against "act[ing] contrary to the employer's interest." Lamorte Burns & Co. v. Walters, 167 N.J. 285, 302 (2001). However, "[t]he contexts giving rise to claims of employee disloyalty are so varied that they preclude the mechanical application of abstract rules of law." Cameco, Inc. v. Gedicke, 157 N.J. 504, 516 (1999). Therefore, such a claim must be considered under a flexible, fact-sensitive approach. Ibid.
The Supreme Court has articulated some general principles that govern consideration of such a claim:
The egregiousness of the employee's conduct may affect the determination of both the commission of a breach and the appropriate remedy. Whether an employee who has not obtained the employer's consent may engage in conduct that assists a competitor depends on the facts of each case. In some cases, the assistance may be so unintended or inconsequential that it will not result in a breach of the employee's duty of loyalty. In other cases, the assistance may be so substantial that the employee will be liable for a breach of that duty. Thus, slight assistance to a direct competitor could constitute a breach of the employee's duty of loyalty. When competition is indirect or minimal, however, the employer, to establish a breach, may be required to show that the employee rendered substantial assistance to the competitor. Employees also may breach their duty of loyalty by aiding an adverse party engaged in a transaction with their employer, . . . or by aiding one whose interests conflict with those of their employer[.] . . .
In an appropriate case, damages may include profits the employee earned in another enterprise while still employed, . . . and compensation for a direct injury suffered by the employer as a result of the employee's breach[.]. . . Thus, the Restatement (Second) of Agency states generally that "[a]n agent is subject to liability for loss caused to the principal by any breach of duty." If the employee usurped a corporate opportunity or secretly profited from a competitive activity, the employer may recover the value of the lost opportunity or the secret profit.
According to the current Restatement, when the employee's conduct is "willful and deliberate" or "serious," the employee may not set off the value of his or her services against the employer's claim to recoup compensation paid to the employee. Thus, the egregiousness of the employee's conduct may affect the employer's right to withhold or recoup the employee's compensation. If the employee directly competes with the employer, aids the employer's direct competitors or those with interests adverse to the employer's interests, participates in a plan to destroy the employer's business, or secretly deprives the employer of an economic opportunity, the employee may forfeit the right to compensation. In contrast, if the employee's breach is minor, involves only a minimal amount of time, or does not harm the employer, the employee may be entitled to all or substantially all of his or her compensation.
[Id. at 517-21 (citations omitted).]
Applying these principles, it is clear there are contested factual issues both as to Cooper and Clough's liability to NBS for breach of the duty of employee liability and, if such a breach is established, the proper amount of damages to be assessed. First, we note that neither Cooper nor Clough entered into a written employment agreement requiring them to work solely for NBS. Moreover, D'Alessandro has not alleged that he had an oral agreement with either defendant to work solely for NBS. Therefore, it cannot be concluded on the present record that Cooper or Clough breached any contractual duty to NBS simply by performing services for another party during their employment with NBS.
A breach of the duty of employee loyalty could still be found if the party for whom those services were performed was NBS's competitor or the services were part of NBS's business that Cooper and Clough were required to perform only on NBS's behalf. See id. at 516-18. However, there were factual issues that precluded a summary judgment that Cooper or Clough had committed such a breach of the duty of employee loyalty.
Although Cooper performed some limited services for Rutigliano while employed by NBS, for which he was apparently paid $978.56, NBS voluntarily terminated its relationship with Rutigliano before those services were performed. Therefore, we are unable to conclude as a matter of law that Cooper usurped a business opportunity for himself that he was required to perform for NBS. Moreover, it is arguable that this work was "so . . . inconsequential that it [did] not result in a breach of the employee's duty of loyalty[,]" even if it should have been performed on NBS's behalf. See id. at 517. And even if the assistance Cooper provided Rutigliano constituted a breach of the duty of employee loyalty, the limited nature of that assistance would be relevant to the determination of the proper measure of damages. See id. at 521 (noting that "if the employee's breach is minor, or involves only a minimal amount of time, . . . the employee may be entitled to all or substantially all of his or her compensation").
Although Clough performed services for Colonna, which was a former customer of NBS, Colonna had terminated its relationship with NBS before Clough began performing those services, and Clough testified that Colonna would not have resumed that relationship under any circumstances because of a "diverting issue" Colonna had with NBS and because of its principals' dislike of D'Alessandro. Consequently, even if Clough's performance of services for Colonna constituted a breach of her duty of employee loyalty to NBS, there would be a question whether that breach was a proximate cause of any damages suffered by NBS. See id. at 518.
Furthermore, Clough testified that the only work she performed for Colonna during the course of her employment with NBS involved the calculation of commissions and the preparation of "deal sheets."*fn2 We see no evidence that NBS performed such services for Colonna or any other customer. Therefore, there is no basis in the existing record for concluding that Clough's performance of this work for Colonna usurped a business opportunity that NBS could have performed. Moreover, even if this activity were found to have breached Clough's duty of employee loyalty, the fact that it did not involve work performed by NBS would be relevant to the determination of damages. See id. at 521 ("[I]f the employee's breach . . . does not harm the employer, the employee may be entitled to all or substantially all of his or her compensation").
NBS's other claims of breach of the duty of employee loyalty against Cooper and Clough also present contested issues of material fact. NBS's claim that Cooper breached his duty of employee loyalty by arranging, while he was still employed by NBS, for one of NBS's clients, Washington Quality Foods, to terminate its relationship with NBS and to appoint Universal Marketing as its marketing representative is based on a letter addressed to "Tom Cooper" at "Universal Marketing," appointing Universal as its "broker" for certain "New York Metro area accounts." The upper right hand corner of the letter contains the date of "mach 1, 2005." Assuming this date was actually March 1, 2005, it was six days before Cooper terminated his employment with NBS. However, NBS did not authenticate this letter or indicate how it obtained a copy. NBS did not depose any representative of Washington Quality Foods to determine whether it sent this letter to Cooper on March 1, 2005, nor did NBS ask Cooper or Gonnella at their deposition whether they received such a letter before the termination of Cooper's employment with NBS. Moreover, the record also contains a letter from Washington Quality Foods to NBS dated March 10, 2005, which terminated its relationship with NBS and stated that "[s]ince Tom Cooper has decided to leave your organization, we decided to follow Tom to his new business." This letter may support an inference, in the absence of other evidence, that the "mach 1, 2005" date on the letter relied upon by NBS was a misprint and that the letter was actually sent on March 10, 2005, after Cooper left NBS and began his employment with Universal Marketing. Therefore, this letter is insufficient, by itself, to support a finding that Cooper solicited the Washington Quality Foods account on Universal's behalf while he was still employed by NBS.
Clough's admission that she made disparaging comments about NBS to four of NBS's customers while she was employed by NBS could support a claim of breach of the duty of employee loyalty. See Cameco, supra, 157 N.J. at 522 ("Employees should not engage in conduct that causes their employers to lose contracts, sales, or potential sales."). However, it is unclear whether Clough's comments had any adverse effect upon NBS's business operations. Although it appears that two of the customers to whom Clough made these comments terminated their relationship with NBS around the same time that Clough left NBS, Clough testified that those customers had been dissatisfied with NBS's performance of its work for them. Therefore, there is a factual issue as to whether Clough's negative comments about NBS to these customers played any role in their decision to terminate their relationships with NBS.
Accordingly, we conclude that summary judgment was not warranted on any of NBS's breach of employee loyalty claims against Cooper and Clough. We turn next to NBS's unjust enrichment claim against Universal Marketing.
To show unjust enrichment, "a plaintiff must show both that defendant received a benefit and that retention of that benefit without payment would be unjust." Cameco, Inc. v. Gedicke, 299 N.J. Super. 203, 218 (App. Div. 1997), (quoting VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994)), aff'd as modified, 157 N.J. 504 (1999). The basis of NBS's unjust enrichment claim against Universal was a $7,925.99 commission check paid to Universal by a former customer of NBS, Source One, which NBS claims was for services it performed before Source One terminated their relationship. This claim was based solely on the commission check, dated May 18, 2005, and an accompanying spreadsheet for commissions earned for the period from October 2004 through March 2005. However, the claim was not supported by an affidavit of D'Alessandro alleging that NBS did not receive payment for that amount of commissions from Source One or any other evidence that NBS, not Universal, was the party to which this commission should have been paid. We also note that the spreadsheet indicates more than half of the commissions were for work performed during March 2005, which was the month Source One terminated NBS and retained Universal to perform the services formerly performed by NBS. Therefore, it is unclear on this record whether the $7,925.99 commission check was for services performed by NBS.
Accordingly, the partial summary judgment against Cooper, Clough and Universal Marketing is reversed, and the case is remanded to the trial court for further proceedings in conformity with this opinion.