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Time Systems International Co., Inc. v. Datamatics Management Services

August 12, 2009


On appeal from the Superior Court of New Jersey, Chancery Division, Bergen County, Docket No. C-103-07.

Per curiam.


Argued June 2, 2009

Before Judges Parker, Yannotti and LeWinn.

Defendant Datamatics Management Services, Inc. appeals from a judgment entered on May 15, 2008, awarding plaintiff Time Systems International Co., Inc. $495,782 in damages on its claims of breach of contract and tortious interference with prospective economic advantage, and an order entered on July 9, 2008, awarding plaintiff attorneys' fees and costs. For the reasons that follow, we reverse.


Defendant is the developer and licensor of a time-and-attendance software program known as TC-1. Defendant also provides support services to users of the TC-1 software. The TC-1 system allows its users to track employees' hours and generate automatic payroll records. Plaintiff is a reseller of software and hardware related to time-and-attendance programs. The parties entered into a series of agreements under which plaintiff acted as a distributor of TC-1 and generally precluded defendant from selling TC-1 to plaintiff's "clients" or "customers".

In March 1993, defendant sent plaintiff a letter of understanding confirming their discussions. The letter provided in part that defendant would not make any direct sales contact to an "account" identified by plaintiff for a period of six months after the "account is made known" to defendant by plaintiff. In October 1995, the parties entered into an agreement, which stated that "[a]ny prospect or current client [that plaintiff] is working with will be considered [plaintiff's] client, provided [defendant] has not directly contacted that prospect or client within 30 days prior to the date [plaintiff] informs [defendant] they are a prospect or client."

Sometime in 1994, plaintiff sold defendant's TC-1 software system for use at Coca-Cola's Minute Maid plant in Hightstown, New Jersey. The purchase order was issued by Coca-Cola Foods, a division of The Coca-Cola Company, from its corporate address in Houston, Texas. The purchase order directed that the product be shipped and billed to Coca-Cola Foods in Hightstown.

In May 1996, the parties entered into a written distributor agreement for an initial term of approximately three years, which would be automatically renewed for successive twelve-month periods unless either party elected not to renew. The agreement provided in part that, although plaintiff's "primary focus" would be the New York, New Jersey and Connecticut area, plaintiff could sell the TC-1 system and related services "without restriction within the continental United [S]tates and the rest of the world." It should be noted, however, that under the agreement, international sales were limited to South and Central America.

The 1996 agreement also stated that sales by defendant were permissible, including those made within plaintiff's non-exclusive area. The agreement stated, however, that, for a period of five years after the termination of the agreement, "[defendant] shall not provide support or any other service, to any client of [plaintiff] using [defendant's] products, without consent of [plaintiff]." The 1996 agreement also stated that:

[plaintiff] will provide to [defendant], in writing, the names of prospects [plaintiff] wishes to remain proprietary (as defined herein) to [plaintiff]. [Defendant] will review these names and, within five (5) business days, notify [plaintiff] of its receipt of the list and any of the names listed that [defendant] has on its own prospect list and considers proprietary to [defendant]. Prospects proprietary to either party shall remain so for a minimum of siX (6) months. Parties hereto agree not to contact prospects deemed proprietary to the other. At the end of 6 months, [plaintiff] shall disclose to [defendant] any proprietary prospect that it continues to contact at least every 30 days, and that it wishes to have remain proprietary and continue as proprietary to [plaintiff]. [Plaintiff] may continue this process during the term of this agreement.

On March 21, 1996, plaintiff sent defendant a list of prospects and asked which would be proprietary to plaintiff. Coca-Cola was one of the prospects listed. Defendant returned the list to plaintiff. "No" was marked next to Coca-Cola. Defendant's president testified that he refused to allow Coca- Cola to become proprietary to plaintiff because plaintiff had not identified any specific location for the company.

At some point thereafter, Kevin Heinle ("Heinle"), defendant's vice president, received a call from an equipment manufacturer in Michigan, who advised that Minute Maid might be interested in one of defendant's software products for use at its facility in Paw Paw, Michigan. Heinle flew to Paw Paw and met with the plant manager. Heinle also met with about thirty-five of the plant's supervisors. The individuals at Paw Paw apparently were unaware that the TC-1 system was already in place at the Minute Maid facility in Hightstown.

On January 25, 1999, Heinle submitted a proposal for the sale of the TC-1 system, which was accepted. The purchase order for Paw Paw was not introduced as evidence in this case. The record shows, however, that defendant sent the bills for the TC-1 software to Minute Maid at Paw Paw.

While he was installing the system at the Paw Paw facility, Heinle learned that a Coca-Cola plant in Waco, Texas was being converted to a Minute Maid plant. Heinle contacted Waco and later traveled there to speak with its plant manager and supervisors. Defendant ultimately sold the TC-1 software system for use at Waco. On March 2, 1999, defendant billed Minute Maid for the purchase of the TC-1 system at the Waco address.

Heinle also sold the TC-1 software for use at a Minute Maid bottling plant in Northampton, Massachusetts. On November 30, 2000, defendant billed Minute Maid at the Northampton address. In addition, Heinle obtained an order for the TC-1 system from CCDA Waters, L.L.C. ("CCDA") of Houston, Texas. CCDA apparently was established to facilitate Coca-Cola's acquisition of a portion of Dannon Foods' beverage business. The CCDA ...

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