Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Joseph Oat Holdings, Inc. v. RCM Digesters

December 11, 2009

JOSEPH OAT HOLDINGS, INC., BIOTHANE CORPORATION, ROBERT SAX, MICHAEL HOLTZ, GRAIG ROSENBERGER, MARTIN KAPLAN, RONALD KAPLAN, JOHN MURPHY, AND RCM BIOTHANE, LLC, PLAINTIFFS,
v.
RCM DIGESTERS, INC. AND MARK MOSER, DEFENDANTS/ COUNTERCLAIMANTS/ THIRD-PARTY PLAINTIFFS.



The opinion of the court was delivered by: Hillman, District Judge

OPINION

Currently pending before the Court is plaintiffs' third partial motion for summary judgment on defendants' counterclaims.

As this case*fn1 has already involved several opinions, the extensive background will not be stated again here, other than to summarize that plaintiffs and defendants once operated a joint venture, RCM Biothane, a business that promoted, designed, built, and sold anaerobic digester systems, but as of August 7, 2006, their business relationship terminated. The main issue in the case is the effect and validity of the Separation Agreement drafted on August 7, 2006. Tangential to that issue are various claims, including the ones that are the subject of plaintiffs' third summary judgment motion--defendants' counterclaims for fraud, breach of the covenant of good faith and fair dealing, trademark infringement, unlawful interference with prospective economic advantage, breach of the confidentiality agreement, misappropriation of trade secrets, violation of the Anti-cybersquatting Act, a demand for an accounting, breach of the duty of loyalty and duty of care, mismanagement, self-dealing, usurpation of corporate opportunities, corporate waste, and for punitive damages. As discussed below, plaintiffs' motion will be denied.

DISCUSSION

As demonstrated by the two very different tales told by the parties, and the opposing views of the same conduct, all supported by evidence, whether it be documentary or based on testimony to be evaluated by a jury, issues of material and disputed fact exist as to all of the claims that are the subject of plaintiffs' current motion.*fn2 Accordingly, the Court will only address the arguments that plaintiffs contend are issues that can be resolved as a matter of law.

First, plaintiffs contend that defendants' fraud claims as to the parties' agreements prior to the Separation Agreement--the Asset Purchase Agreement, the Operating Agreement, the Employment Agreement, and other various agreements--are barred because tort actions are not cognizable when valid contracts govern the parties' conduct that is the subject of the alleged fraud. That is a correct legal premise generally. See International Minerals and Min. Corp. v. Citicorp North America, Inc., 736 F. Supp. 587, 597 (D.N.J. 1990) ("It has . . . consistently been held that an independent tort action is not cognizable where there is no duty owed to the plaintiff other than the duty arising out of the contract itself."). Here, however, it is inapplicable because defendants claim that plaintiffs intentionally and falsely misrepresented material facts to defendants to induce them to enter into these agreements. See Lo Bosco v. Kure Engineering Ltd., 891 F. Supp. 1020, 1033 (D.N.J. 1995) ("[D]etermining whether a situation is 'essentially contractual' where the legal elements of fraud also exist will not always be straightforward. On balance, however, the Court finds that the situation presented here is such that an allegation of fraud may be maintained alongside the contract claim. . . . [T]he disappointed promisee is an individual who alleges he was lied to by other individuals proposing a joint venture. The Court has found that it remains to be litigated whether the representations of intent to enter into an agreement were actually made. . . . [I]f such representations were made, they were a knowing and intentional falsehood."). Thus, defendants' fraud claims will not be dismissed on this basis.

Plaintiffs also argue that defendants' claim for breach of the implied covenant of good faith and fair dealing must be dismissed as a matter of law for the same reason. Again, that premise is not applicable in this case. See Seidenberg v. Summit Bank, 791 A.2d 1068, 1077 (N.J. Super. Ct. App. Div. 2002) ("The guiding principle in the application of the implied covenant of good faith and fair dealing emanates from the fundamental notion that a party to a contract may not unreasonably frustrate its purpose."); cf. Wilson v. Amerada Hess Corp., 773 A.2d 1121, 1130 (N.J. 2001) ("[An allegation of bad faith or unfair dealing should not be permitted to be advanced in the abstract and absent improper motive.").

Third, plaintiffs contend that defendants' claims for trademark infringement, unlawful interference with prospective economic advantage, breach of the confidentiality agreement, and misappropriation of trade secrets should be dismissed as a matter of law because of defendants' inability to provide proof of damages. More specifically, plaintiffs argue that defendants' expert does not articulate any damages causally related to these claims. Because it is a fundamental principle that a plaintiff must prove damages with a reasonable degree of certainty, and defendants have failed to do so for these claims, they must be dismissed.

Plaintiffs' premise is generally correct. A plaintiff must "prove damages with such certainty as the nature of the case may permit, laying a foundation which will enable the trier of the facts to make a fair and reasonable estimate," because damage awards may not be based on mere speculation. Kelly v. Berlin, 692 A.2d 552, 558 (N.J. Super. Ct. App. Div. 1997) (citations omitted). Plaintiffs' argument, however, does not apply here.

For their unlawful interference with prospective economic advantage claim, defendants are required to prove (1) their expectation of economic benefit; (2) plaintiffs' knowledge of that expectation; (3) plaintiffs' wrongful, intentional interference with that expectancy; (4) the reasonable probability of benefit to the defendants in the absence of that wrongful interference; and (5) damages. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1167 (3d Cir. 1993). Despite plaintiffs' argument to the contrary, defendants' expert links that claim with $678,287 in denied profits owed to defendants.

With regard to defendants' other claims, proving damages to a "reasonable degree of certainty" is not necessary. For their trademark infringement claim, in order for defendants to prove a violation of their mark, they need only show a likelihood of confusion, and not damages extending from actual confusion. Video Pipeline, Inc. v. Buena Vista Home Entertainment, Inc., 275 F. Supp. 2d 543, 575 (D.N.J. 2003) (explaining the difference between proving liability and damages). Further, rather than proving actual damages on their end, if they prove liability, defendants would be entitled to recover plaintiffs' profits, the costs of the action, and possibly reasonable attorney fees. See 15 U.S.C. § 1117(a); Video Pipeline, 275 F. Supp. 2d at 575 (explaining that the remedy of the recovery of profits "flows not from the plaintiff's proof of its injury or damage, but from its proof of the defendant's unjust enrichment or the need for deterrence").*fn3

For defendants' breach of the confidentiality agreement claim, defendants need only prove a breach of the contract, and no actual damages. Video Pipeline, 275 F. Supp. 2d at 568 (explaining that a plaintiff who proves a breach of contract but no actual damages may not recover more than nominal damages). Similarly, for defendants' misappropriation of trade secrets claim, they are not required to establish damages to prove their claim. Ace American Ins. Co. v. Wachovia Ins. Agency Inc., 2008 WL 4165746, *4 (D.N.J. 2008) (quoting Rohm and Haas Co. v. Adco Chemical Co., 689 F.2d 424, 429-30 (3d Cir. 1982) (applying New Jersey law)) (explaining that to prove a misappropriation of trade secrets claim, a plaintiff must show: "(1) the existence of a trade secret, (2) communicated in confidence by the plaintiff to the employee, (3) disclosed by the employee in breach of that confidence, (4) acquired by the competitor with knowledge of the breach of confidence, and (5) used by the competitor to the detriment of the plaintiff").*fn4 Accordingly, defendants' claims for trademark infringement, unlawful interference with prospective economic advantage, breach of the confidentiality agreement, and misappropriation of trade secrets will not be dismissed as a matter of law on the basis of insufficient damages.

Next, plaintiffs argue that defendants' Anti-cybersquatting Act claim must be dismissed as a matter of law because defendants have not presented any proof that plaintiffs used or profited from the rcmdigesters.com domain name. To prevail on such a claim, defendants must prove that plaintiffs had a bad faith intent to profit from rcmdigesters.com. 15 U.S.C. § 1125(d)(1)(A). A "bad faith intent to profit" can be demonstrated by "the person's offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person's prior conduct indicating a pattern of such conduct." Id. § 1125(d)(1)(B)(VI). Further, defendants must also prove that plaintiffs "register[ed], traffic[ked] in, or use[d]" that domain name. Id. § 1125(d)(1)(A).

Defendants have provided evidence that until November 6, 2006, rcmdigesters.com was owned by plaintiff Biothane Corporation, until it transferred the name back to defendants. Defendants also claim that plaintiffs held their domain name hostage to allow plaintiffs to secretly copy their computer files and to inhibit their ability to market their business. Thus, even taking as true plaintiffs' contention that they did not use the domain name, they "registered" it, and disputed facts exist as ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.