March 27, 2009
RUGER CHEMICAL CO., INC. PLAINTIFF-RESPONDENT/ CROSS-APPELLANT,
UNIVERSAL PRESERVACHEM, INC., MICHAEL RAVITZ, DANIEL RAVITZ, AND TAMMY HUGHES JENNERICH, DEFENDANTS-APPELLANTS/CROSS-RESPONDENTS.
On appeal from the Superior Court Of New Jersey, Law Division, Middlesex County, Docket No. L-1895-04.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued October 20, 2008
Before Judges Reisner, Sapp-Peterson and Alvarez.
Defendants, Universal Preservachem, Inc. (UPI),*fn1 Michael Ravitz, Daniel Ravitz, and Tammy Hughes Jennerich (Jennerich) (collectively "defendants"), appeal from the judgment of the trial court, following a bench trial, finding (1) that defendant, Jennerich, breached her employment contract and duty of loyalty arising out of her disclosure of confidential information relating to plaintiff's customer and supplier information; and (2) that defendants, Michael Ravitz, Daniel Ravitz, and UPI knew of and facilitated Jennerich's conduct. The court entered judgment in favor of plaintiff for $144,144, exclusive of prejudgment interest, which the court also awarded in a post-judgment application.
On appeal, defendants contend (1) the court erred when it failed to dismiss the complaint after striking plaintiff's damages expert; (2) erred when it allowed plaintiff to use portions of defendants' expert's findings as part of plaintiff's case-in-chief; (3) that plaintiff failed to establish a causal connection between the documents Jennerich allegedly removed and the products that UPI sold; (4) the court failed to consider evidence that the two products with the largest dollar sales volumes were never sold to San Mar, a Ruger customer, by UPI during the relevant time period; (5) the court erred in failing to admit deposition testimony related to the reasons San Mar decreased its customer requirements from plaintiff; (6) the court erred in permitting testimony from two Ruger employees, Dorothy Bergheimer and Kelly Hayward; and (7) erred by permitting gross profits as a measure of damages. We have considered each of these contentions in light of the record and applicable legal contentions and reject each of them.
Plaintiff, who is a reseller of chemical products, purchases products from suppliers and then repackages them into sizes which are convenient for customer use. UPI, a competitor of Ruger, is engaged in the same business. Michael Ravitz is Vice President of Sales and Marketing for UPI, while Daniel Ravitz is its President. Jennerich, before joining UPI in January 2001, worked for Ruger, first as a customer service representative in 1989. One year later, she also became a purchasing agent. In both positions, she had access to information about Ruger's products, customers and suppliers, which information was treated by Ruger as confidential.
On November 13, 1992 Jennerich signed a confidentiality agreement with Ruger. The agreement did not, however, contain a non-compete clause. The information protected under the agreement included a list of actual or potential customers not known to the public, call lists, price lists, discounts, purchasing history, and individual contacts. Also covered under the agreement were the identities of manufacturers, distributors, suppliers, and contractors not publicly known. The agreement was binding during and after employment. The consideration for the agreement was Jennerich's employment.
In May 2000, Ruger was sold. A new employment agreement was prepared that contained a non-compete agreement. Jennerich never executed the agreement because she resigned before the agreement was presented to her for her signature. She submitted her resignation, effective January 30, 2001, in a written letter dated January 16, 2001. She continued working, however, until approximately January 26. On January 30, 2001, she signed an employment agreement with UPI.
In November 2002, Ruger filed a seven-count complaint against defendants. A non-jury trial commenced on January 16, 2007, and consumed four trial days. At its conclusion, the court issued a written opinion in which it found that Jennerich breached her contract with Ruger, breached her common law duty of loyalty, and that as a result of Jennerich's breach, Ruger sustained a loss of business to UPI and damages. The court also found that the Ravitz brothers and UPI knew of and facilitated this wrongful conduct. The court rejected plaintiff's claim for punitive damages, finding no conduct on the part of defendants that rose to the level of wantonness that would justify an award of punitive damages. The court entered judgment in favor of plaintiff in the amount of $144,144.
On appeal, defendants raise the following points for our consideration:
THE TRIAL JUDGE ERRED BY FAILING TO DISMISS THE CASE AFTER STRIKING PLAINTIFF'S DAMAGE EXPERT ON DEFENDANT[S'] MOTION TO STRIKE EXPERT AND FOR SUMMARY JUDGMENT.
THE TRIAL JUDGE ERRED BY ALLOWING PLAINTIFF TO USE PORTIONS OF DEFENDANT[S'] EXPERT'S FINDINGS ON PLAINTIFF'S CASE-IN-CHIEF.
REGARDLESS OF THE COURT'S CREDIBILITY FINDING THAT MS. JENNERICH IMPROPERLY REMOVED RUGER DOCUMENTS BEFORE WORKING FOR UPI, NO PROXIMATE CAUSE WAS EVER ESTABLISHED BETWEEN THOSE DOCUMENTS ALLEGEDLY REMOVED AND ANY PRODUCTS SOLD BY UPI WHICH FORMED RUGER'S DAMAGE CLAIM.
THE TRIAL JUDGE ERRED BY FAILING TO CONSIDER THE EVIDENCE OF PRODUCTS WITH THE TWO LARGEST DOLLAR SALES VOLUME, NEVER SOLD BY UPI TO SAN MAR DURING THE RELEVANT PERIOD, WHICH SAN MAR STOPPED BUYING FROM RUGER FOR REASONS COMPLETELY UNRELATED TO TAMMY JENNERICH.
THE TRIAL JUDGE ERRED BY FAILING TO ADMIT DEPOSITION TESTIMONY BY PLAINTIFF'S VICE-PRESIDENT AS TO SAN MAR'S REASONS FOR ITS DECREASE IN PURCHASES FROM PLAINTIFF, WHICH HAD TO DO WITH A DECREASE IN ITS CUSTOMER[S'] NEEDS[,] NOT JENNERICH.
THE TRIAL JUDGE ERRED BY ALLOWING MS. BERGHEIMER AND MS. HAYWARD TO TESTIFY.
THE TRIAL JUDGE ERRED BY PERMITTING GROSS PROFIT AS A MEASURE OF DAMAGES.
On January 4, 2006, the court granted defendants' motion to strike that portion of the report prepared by plaintiff's expert, Irwin Palefsky, related to damages and his factual conclusion that Jennerich "stole confidential information . . . ." During oral argument on the motion, the court stated that if plaintiff's theory of damages was gross profits, no expert was required. Likewise, the court expressed the view that if the theory of damages was net profits and plaintiff was willing to accept UPI's financial statements, no expert would be needed in that regard as well. Defense counsel argued that plaintiff should not be allowed to advance a new theory for calculating damages so close to the January 23, 2006 trial date. The court directed the parties to make simultaneous submissions framing the issues as "whether plaintiff can pursue an alternate damages theory to that set forth in the supplemental report of Mr. Palefsky in the procedural posture of this case on or before 1/11/06." The court scheduled oral argument for January 20.
Whether the hearing took place on that date is not reflected in the appellate record.
The next event reflected in the record is a February 8, 2006 Case Management conference that resulted in the March 2, 2006 Case Management Order V. The order permitted plaintiff to submit a new expert report, allowed the defense to submit a responsive expert report three weeks later, and depositions of the experts to be taken. The court ordered that all discovery be completed by April 28, 2006, and fixed the new trial date for June 27, 2006. Trial did not actually take place until January 2007.
How the court reached its decision permitting plaintiff to submit a new expert report cannot be determined on this record as neither party's brief addresses the events that occurred between the issuance of the January 4, 2006 order and the March 2, 2006 Case Management Order V. It is not our function to speculate on how the court arrived at its decision. Moreover, in view of the fact that the actual trial did not take place until one year later, we are not persuaded that the court abused its discretion in allowing plaintiff to explore a new theory of damages after it excluded the damages portion of the Palefsky report and testimony.
The court did not abuse its discretion in permitting plaintiff to use a chart prepared by UPI's expert, Dr. Arthur Rich, Ph.D., detailing UPI's sales receipts of products from those customers who previously purchased the same products from plaintiff. Dr. Rich was retained as an expert in anticipation of litigation, and his report, including the chart at issue, was provided to plaintiff during discovery. As the Court observed in Fitzgerald v. Stanley Roberts, Inc., "[b]y declaring that an expert witness will be produced at trial and providing the expert's identity and opinion to another party, as required by Rule 4:10-2(d)(1), the original proponent has waived his claim that the information is privileged. Thus, we hold that access to the testifying witness is allowed and the adversary may produce a willing expert at trial." 186 N.J. 286, 302 (2006). Moreover, UPI did not contest the accuracy of the chart.
Defendants next claim that, even accepting the trial court's credibility determination that Jennerich improperly printed and removed plaintiff's customer sales documents while still employed with plaintiff, the proofs plaintiff presented nonetheless failed to establish a causal connection between Jennerich's actions and plaintiff's alleged losses. We disagree.
Admittedly, there is no direct evidence establishing the causal connection between Jennerich's removal of company documents and plaintiff's resulting losses. However, direct evidence is not required. Proximate cause may be established by direct evidence or circumstantial evidence. Beyer v. White, 22 N.J. Super. 137, 144 (App. Div. 1952). "[A]lthough plaintiffs bear the burden of proving causation, 'they are not obliged to establish it by direct, indisputable evidence.'" Thorn v. Travel Care, Inc., 296 N.J. Super. 341, 347 (App. Div. 1997) (quoting Kulas v. Public Serv. Elec. & Gas Co., 41 N.J. 311, 319 (1964). Rather, "[t]he matter may rest upon legitimate inference, so long as the proof will justify a reasonable and logical inference as distinguished from mere speculation." Beyer, supra, 22 N.J. Super. at 144.
An appellate court must defer to the findings of a trial court if they are supported by adequate, credible evidence. Rova Farms Resort v. Investors Ins. Co., 65 N.J. 474, 483-84 (1974). This is especially true when a court has the ability to assess the credibility of witnesses and is able to make observations about character and demeanor that are not evident from the record. State v. Locurto, 157 N.J. 463, 470, 474 (1999).
In this case, there was ample credible evidence suggesting that Jennerich was hired to work for UPI prior to leaving her job at Ruger. The court determined that she was not honest about her employment status. The court further determined that she was not a credible witness. Further, the court determined that the witnesses who observed her photocopying certain documents were credible witnesses. Thus, there is substantial, competent evidence to reasonably support the inferences drawn by the court.
Next, the court's decision to exclude evidence related to the products that San Mar stopped purchasing from Ruger and had never purchased from UPI during the relevant two-year time period involved the exercise of discretion. State v. Torres, 183 N.J. 554, 567 (2005). Appellate courts apply an abuse of discretion standard to the evidentiary rulings of a trial court. In re Commitment of R.S., 339 N.J. Super. 507, 531 (App. Div. 2001) (noting that appellate courts generally apply "an abuse of discretion standard to the evidentiary rulings of a trial court") (citing State v. Conklin, 54 N.J. 540, 545 (1969)). Here, because plaintiff was only awarded damages for the sales UPI made, we agree the fact that San Mar made no purchases from Ruger during this time period was irrelevant. Hence, the trial court did not abuse its discretion in excluding this proffered evidence.
Likewise, the court properly excluded, as hearsay, the proffered testimony from plaintiff's vice president that he was told by a San Mar employee that San Mar's requirements from plaintiff declined because of San Mar's own decrease in its customers' demands. Finally, there was no abuse of discretion in permitting the testimony of the two witnesses who observed Jennerich copying hundreds of documents shortly before she left her employment with plaintiff. This evidence was circumstantial evidence of a disputed fact, namely, that she improperly removed confidential information belonging to plaintiff. The fact that the employees could not specifically identify the documents bore upon the weight the court should accord the testimony, not its admissibility.
In their fourth point, defendants allege the court erred in permitting gross profits as a measure of damages. Specifically, defendants contend the "[t]he trial judge did not allow any deduction for the subtraction of overhead costs to [UPI] and instead permitted gross profit by [UPI] as to these products from those customers." Further, in their brief, defendants claim that the measure of damages "was the subject also of a motion before trial."
We initially note that defendants' brief contains no citation to the record referencing the court's disallowance for "the deduction for the subtraction of overhead costs . . . ." Nor is there a citation to the record as to a "motion before trial" in this regard. It is not our function, as a reviewing court, to scour the record to find the facts supporting the arguments raised on appeal. Recently, we had the occasion to express our dissatisfaction with this approach to appellate practice:
Plaintiffs ignore the fact that it is their responsibility to refer us to specific parts of the record to support their argument. They may not discharge that duty by inviting us to search through the record ourselves. State v. Hild, 148 N.J. Super. 294, 296 (App. Div. 1977). It is improper to request us to scour . . . plaintiffs' appendix, as well as computer disks without informing us of what particular pages supposedly support their argument. [Spinks v. Twp. of Clinton, 402 N.J. Super. 465, 474-75 (App. Div. 2008).]
Moreover, the only pretrial transcript addressing the issue of damages that is included in the record is the January 4, 2006 transcript in which the court barred the damages portion of the Palefsky report and directed the parties to brief the issue whether plaintiff could embark upon a new theory of damages. The resolution of that pending issue is not part of the record.
Nonetheless, regarding plaintiff's potential new theory of calculating damages, the following colloquy took place during the January 4, 2006 oral argument:
Without the expert opinion that I have now struck, how can the plaintiff prove damages? And that question becomes one can it be proved solely through facts. And if it is disgorgement on gross sales minus cost of sales, so it's gross profits, that he can do. I mean he can do that just from your records. He doesn't need an expert. Right?
[DEFENDANTS' ATTORNEY]: Yes. We could make a simple subtraction of my client's sales of those products minus the cost of the goods.
THE COURT: Right. So if it's gross sales, that is, you don't even need expert testimony.
[DEFENDANTS' ATTORNEY]: No, Judge. If it's gross profits.
THE COURT: I'm sorry. Gross profits.
[DEFENDANTS' ATTORNEY]: Gross sales --
THE COURT: I know. I misspoke. I misspoke. If it's gross profits you don't need an expert. If it's net profits and the plaintiff is willing to take your clients' financial statements or however they do the net profits, he doesn't need an expert either. Because he's not disputing the way you've done it.
[DEFENDANTS' ATTORNEY]: So that's the question then.
THE COURT: Yeah. But if he wants to do a different analysis of what the net profits are he needs an expert, which he doesn't have.
[DEFENDANTS' ATTORNEY]: Right. And may I just be heard on this point? I understand now the question. The question is does the plaintiff have anywhere left to prove any kind of damage, if it were to prove liability.
THE COURT: Yes.
[DEFENDANTS' ATTORNEY]: Okay. My problem with that, Judge, is, and I'll state my objection to this is today is January 4th. We did have a January 23rd trial date and we did set these motions. And my client has produced information for a particular period of time, two years, and we've never gotten to the focus of how long this can be anyway, and has produced information that has show[n] their selling price minus their cost of goods. We have that.
We've also produced our accountant's records. No report from our accountant, but our accountant's records which have various calculations that a person with some expertise as an accountant could make.
But I was never informed that this is going to be the method of the calculation of the damages. That is not what I've been relying on presenting this. I relied on the first report from Mr. Perleski [sic], which had, I don't mean to be insulting to him, but I'll use the word strange, a very strange method of calculation that had nothing to do with my clients' profits. It had only to do with the plaintiff's profits.
This colloquy does not suggest that UPI challenged gross profits as a measure of calculating damages. Rather, it appears that defendants objected to the timing of the proffered methodology. Moreover, we disagree that Platinum Mgmt. Inc. v. Dahms, 285 N.J. Super. 274 (Law Div. 1995), as defendants urge, is dispositive.
In Platinum, the trial judge found that based upon the evidence the defendant presented regarding variable overhead costs, caution dictated that a reasonable amount of overhead costs be deducted from the defendant's gross profits in determining the net profits obtained by the defendant from sales to diverted customers to which the plaintiff was entitled. Id. at 312. Platinum does not stand for the proposition that net profits must always be the measure of damages. Indeed, the trial judge looked to federal cases that have addressed the issue and noted that the federal decisions have predicted that "the New Jersey Supreme Court would hold that where the plaintiff's overhead or fixed expenses are not affected by the defendant's breach, no deduction therefore should be made in calculating the net profits plaintiff would have made but for the breach[.]" Id. at 311. The trial court determined that the same approach should be utilized "where the wrongdoer is asked to disgorge profits." Ibid. (citing Zippertubing Co. v. Teleflex, Inc., 757 F.2d 1401, 1412 (3rd Cir. 1985)). The court noted "'[t]he wrongdoer should not be permitted by misappropriating another's opportunity, to use that opportunity in order to help absorb fixed expenses of its own business.'" Ibid. Here, defendants presented no evidence of its overhead expenses that should have been deducted from its gross profits. Thus, the jury could reasonably infer, as plaintiff's expert suggested in his testimony, that defendants' overhead may not have been impacted as a result of its sales to diverted Ruger customers. We, therefore, find no error in the court permitting plaintiff to present UPI's gross profits as a measure of calculating plaintiff's damages.
Finally, as to plaintiff's cross-appeal contending that the trial court erred in refusing to award punitive damages, we have considered Ruger's arguments in light of the record and applicable legal principles and find that they are of insufficient merit to warrant discussion in a written opinion.