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Cost Reduction Solutions v. Durkin Group


August 22, 2008


On appeal from the Superior Court of New Jersey, Chancery Division, Morris County, C-183-05.

Per curiam.


Submitted August 13, 2008

Before Judges R. B. Coleman and Sabatino.

Plaintiffs Cost Reduction Solutions (CRS) and Michael Albanese (collectively "plaintiffs") appeal from a July 27, 2007 order of the Superior Court, Chancery Division, Morris County, granting summary judgment in favor of defendants Durkin Group, LLC (DG), Kevin Durkin and Richard F. Ruggeri (collectively "defendants"). After reviewing the record in light of the contentions advanced on appeal, we affirm.

In October 2005, plaintiffs filed a Verified Complaint and an accompanying Order to Show Cause, alleging that Ruggeri violated post-employment limitations of a non-compete employment agreement and that Durkin conspired and cooperated with Ruggeri with full knowledge of the agreement between CRS and Ruggeri. In count two of the Verified Complaint, plaintiff alleged that Ruggeri breached a duty of loyalty he owed to CRS not to divulge its confidential information to competitors or other clients either during or after his employment.

On December 29, 2005, following the return date of the Order to Show Cause, the parties entered into a consent order that required Ruggeri to refrain from disclosing to any third party the identity of any of CRS's clients. That order was entered without acknowledgement or stipulation that Ruggeri knew the customers of CRS or that he ever received, reviewed or was advised of any customer list. Thereafter, the parties engaged in discovery and on June 8, 2007, defendants moved for summary judgment. The court heard that motion on June 20, 2007, and entered an order granting summary judgment in favor of defendants and dismissing the complaint with prejudice. On September 4, 2007, plaintiffs filed their Notice of Appeal.

The relevant facts are not in dispute. Durkin is the managing member of DG, a limited liability corporation that provides professional services such as accounting, auditing and technological expertise to various financial institutions. In his capacity as the managing member of DG, Durkin became acquainted with Albanese and learned that Albanese was the President of CRS, a company that could supply qualified professionals to provide accounting and auditing services to DG on an as-needed basis. DG engaged CRS, and in the course of that engagement, various professionals, including Albanese and Ruggeri, provided services to DG.

DG was not satisfied with the work of CRS and Albanese, and with a letter dated September 19, 2005, DG tendered what it described as "full and final payment of [its] obligation to CRS regarding Mr. Ruggeri [with] a schedule of days worked for July, August and through September 16, 2005." Notwithstanding his general dissatisfaction with the performance of CRS, Durkin acknowledges he was satisfied with the work of Ruggeri. He further acknowledges that when Ruggeri indicated that he was no longer working with CRS and that he desired to continue his working relationship with DG, DG hired Ruggeri as an independent contractor to perform accounting and auditing services on its behalf. According to Durkin's certification, he was unaware of any restrictions on Ruggeri's ability to work for DG:

At no point in time did Durkin Group have any knowledge of any restrictions on Mr. Ruggeri's ability to work with Durkin Group nor did Ruggeri advise Durkin Group of any such restrictions. Furthermore, Durkin Group had never entered into any agreement with CRS that prohibited it from engaging any former CRS contractors. In fact, as of this date, Durkin Group has never been provided any agreement restricting Ruggeri's employment with the Durkin Group.

Upon learning that Ruggeri was working directly for DG, plaintiffs initiated this civil action, contending that Ruggeri's employment with DG violated a non-compete agreement he entered into with CRS. Plaintiffs further alleged that DG and Durkin were aware of the existence of their agreement with Ruggeri based on CRS's prior business dealings with defendants. To substantiate their claim that such an agreement existed between CRS and Ruggeri, plaintiffs proffered a chain of e-mail correspondence between Albanese and Ruggeri, dated March 11, 2005, which stated the following:

Here is a simple, CPA trustworthy non-compete: You agree that you can terminate your relationship with Cost Reduction Solutions at any time, however, CRS would like as much as 30 days notice, or, at a minimum, 2 weeks.

Whatever company information that CRS or Michael F. Albanese, CPA shares with you is CRS property and use of such is not allowed without the express written consent of CRS or Michael F. Albanese, CPA.

Any customers CRS or yourself are introduced to or you share information on are CRS property and will remain so until a written agreement of sale or such is executed.

All new accounts that you locate and need the CRS name, concept or services to execute a business relationship with are also CRS property. A 10% finders fee, as well as the fair rate of billing for your own services on this account will be earned by yourself for such.

Kindly click reply, pasted [sic] this into the email message and indicate your acceptance of this non compete agreement. Thank you.

Ruggeri agreed in accordance with the e-mail's instructions.

The trial court concluded that, as to DG, there was clearly no basis for plaintiff's complaint:

There's no agreement, written agreement, or even asserted to be an oral agreement that the Durkin Group or Kevin Durkin was not entitled to continue the work and/or accept the employment of Mr. Ruggeri, nor has it been alleged. So there's no breach of agreement[,] written or oral. Nor is there any breach of any duty of loyalty as between these two businesses.

As to Ruggeri, the court deemed the agreement to be so vague, ambiguous and unclear that plaintiffs would not be able to establish the right to enforce the agreement.

Plaintiffs contend on appeal that the trial court erred in dismissing the complaint. They further argue that the court should not have granted summary judgment.

This court employs the same standard as the trial court in its review of the grant of a summary judgment order. Trinity Church v. Atkin Olshin Lawson-Bell, 394 N.J. Super. 159, 166 (App. Div. 2007); Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995); Prudential Prop. & Cas. Ins. Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div.), certif. denied, 154 N.J. 608, 713 (1998). In making such a determination, a court must weigh "'whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" Liberty Surplus Ins. Corp. Inc. v. Amoroso, P.A., 189 N.J. 436, 445-46 (2007) (quoting Brill, supra, 142 N.J. at 536).

The judgment or order sought shall be rendered forthwith 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 challenged.

[R. 4:46-2(c).]

In that instance, the moving party will be entitled to summary judgment. Id.; Brill, supra, 142 N.J. at 540.

This appeal requires us to interpret the meaning of the contract entered into between CRS and Ruggeri via e-mail on March 11, 2005. We do so applying general principles of contract construction:

First and foremost, "fundamental canons of contract construction require that we examine the plain language of the contract and the parties' intent, as evidenced by the contract's purpose and surrounding circumstances." As stated in Marchak v. Claridge Commons, Inc., "[w]hen reading a contract, our goal is to discover the intention of the parties. Generally, we consider the contractual terms, the surrounding circumstances, and the purpose of the contract." [Highland Lakes Country Club & Cmty. Assoc. v. Franzino, 186 N.J. 99, 115-16 (2006) (citations omitted).]

"[A court] determine[s] a written agreement's validity by considering the intentions of the parties as reflected in the four corners of the written instrument." Leodori v. Cigna Corp., 175 N.J. 293, 302 (2003). "[I]t is not the function of the court to make a better contract for the parties, or to supply terms that have not been agreed upon." Graziano v. Grant, 326 N.J. Super. 328, 342 (App. Div. 1999). "When a contract term is ambiguous, that rule of contract interpretation requires a court to adopt the meaning that is most favorable to the non-drafting party." Pacifico v. Pacifico, 190 N.J. 258, 267 (2007). "The construction of a written contract is usually a legal question for the court, but where there is uncertainty, ambiguity or the need for parol evidence in aid of interpretation, then the doubtful provision should be left to the jury." Great Atl. & Pac. Tea Co., Inc. v. Checchio, 335 N.J. Super. 495, 502 (App. Div. 2000).

Generally, "an employee may compete with his former employer on termination." Ingersoll-Rand Co. v. Ciavatta, 110 N.J. 609, 626 (1988). However, a non-compete agreement may be enforceable if the court is convinced that it satisfies the test for reasonableness set forth in Karlin v. Weinberg, 77 N.J. 408 (1978), and reaffirmed in Cmty. Hosp. Group, Inc. v. More, 183 N.J. 36, 57 (2005) and Pierson v. Med. Health Ctrs., 183 N.J. 65, 69 (2005).*fn1 The Karlin test, also known as the Solari/Whitmyer test,*fn2 requires the court to determine whether:

"(1) the restrictive covenant was necessary to protect the employer's legitimate interests in enforcement, (2) whether it would cause undue hardship to the employee, and (3) whether it would be injurious to the public." Cmty. Hosp. Group, Inc., supra, 183 N.J. at 57. Furthermore, "three additional factors should be considered in determining whether the restrictive covenant is overbroad: its duration, the geographic limits, and the scope of activities prohibited. Each of those factors must be narrowly tailored to ensure the covenant is no broader than necessary to protect the employer's interests." Id. at 58. "Depending upon the results of that analysis, the restrictive covenant may be disregarded or given complete or partial enforcement to the extent reasonable under the circumstances." Ibid.

In the present case, the non-compete agreement contains no language relating to the geographic scope or duration of any limitations imposed. While an employer has a legitimate interest in protecting ongoing relationships with clients, they have no legitimate interests in preventing competition. Id. at 52; Karlin, supra, 77 N.J. at 417. CRS's relationship with DG had been terminated by DG because of the perceived incompetence of DG. Thus, it cannot be said that this restrictive covenant furthered its relationship with DG because no such relationship still existed.

More importantly, the language of the agreement was woefully unclear and it has the potential to harm the public as well as to cause undue hardship to Ruggeri. Moreover, CRS failed to tailor narrowly the duration, the geographic limits and the scope of the agreement. Instead, a review of the quoted e-mail, demonstrates that the inartfully drafted language of the agreement seeks to restrict Ruggeri from providing services to any CRS client unless CRS sold that client to Ruggeri. If, as here, the client had terminated its relationship with CRS, CRS nevertheless insists that Ruggeri could not retain or work for that former client "unless it compensated or negotiated an agreement with CRS." Preventing a former client, with whom CRS no longer maintains a relationship, from obtaining services from a competitor improperly stifles competition. Such a restriction, if enforceable, would tend to deny the former client the right to engage whom it chooses and it would tend to increase the charges for the services it needs. That is inimical to the public interest. Furthermore, CRS's argument in itself reveals the absence of any meeting of the minds or, at best, it typifies the vagueness and uncertainty of the so-called agreement not to compete.

Significantly, the e-mail that purported to set forth the terms of the agreement further reveals the looseness of the agreement in that it provides that Ruggeri could terminate the agreement with CRS at any time, though CRS indicated that it "would like as much as 30 days notice, or, at a minimum 2 weeks." It was, in fact, a short-lived relationship. According to the allegations of the Verified Complaint, Ruggeri commenced employment with CRS on March 11, 2005. He was placed in the service of DG in or about May 2005. DG terminated its relationship with CRS in early September 2005 because of the consistently poor work done by CRS. As the trial court properly determined, DG was not bound by any agreement, written or oral, that restricted its freedom of choice. Because the terms of the agreement between CRS and Ruggeri were ambiguous and did not satisfy the elements of Karlin, we find that the restrictions are not enforceable.

Plaintiffs contends that "[n]ot all of the evidence or proof were presented at the time this motion was heard and therefore the court did not consider certain issues derived from the depositions of the parties." Plaintiffs do not disclose the nature and impact of the omitted evidence or proof. Even now, we would be required to speculate whether such proofs would present a sufficient disagreement to require submission to a jury. As the record stands, there is no genuine issue as to any material fact challenged.

Finally, we note that defendants, who have not cross-appealed, address in their brief the arguments concerning Ruggeri's breach of duty of loyalty and whether Durkin is individually liable to CRS; however, plaintiffs' brief does not mention either of those issues. Accordingly, we do not address them. An issue not briefed is ordinarily waived. See In re Bloomingdale Convalescent Ctr., 233 N.J. Super. 46, 49 n.1 (App. Div. 1989) (the Appellate Division would not decide an issue raised for the first time during oral arguments that had not been briefed); Soc'y Hill Condo. Ass'n, Inc. v. Soc'y Hill Assoc., 347 N.J. Super. 163, 176 (App. Div. 2002) (although an issue was mentioned in plaintiff's brief, it was not "briefed"; therefore, the court deemed it waived).


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