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Fox v. Millman

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


July 15, 2010

THOMAS F. FOX; TARGET HOLDINGS, INC. D/B/A TARGET INDUSTRIES, PLAINTIFFS-APPELLANTS/ CROSS-RESPONDENTS,
v.
JEAN MILLMAN, DEFENDANT, AND POLYMER PACKAGING INC.; LARRY LANHAM; BILL LANHAM, DEFENDANTS-RESPONDENTS/ CROSS-APPELLANTS.

On appeal from the Superior Court of New Jersey, Law Division, Morris County, L-190-04.

Per curiam.

RECORD IMPOUNDED

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 8, 2010

Before Judges Lisa, Baxter and Alvarez.

Plaintiffs Thomas F. Fox and Target Holdings, Inc. (Holdings) doing business as Target Industries (Target), appeal the dismissal of their complaint against defendants Polymer Packaging, Inc., Larry Lanham and Bill Lanham (collectively referred to as defendants). Defendants cross-appeal the denial of their motion for summary judgment as well as the denial of their motion for attorney's fees and costs. Defendant Jean Millman was discharged in bankruptcy and therefore did not directly participate in the proceedings leading to this appeal. For the reasons that follow, we affirm.

I.

On January 20, 2004, plaintiffs filed a complaint against Millman and her employer, who was initially designated as a fictitious company or persons. Once the identity of Millman's new employer was ascertained, plaintiffs on June 10, 2005, amended the complaint to name the present defendants.

The complaint alleged that Millman, a past employee of Target, the precursor to Holdings, had plundered Target's confidential and proprietary information and trade secrets in order to benefit her new employer, defendants. The material included "customer lists, identity of customers, customer product specifications, pricing structure and pricing programs, price lists, files and documents relating to Target customers' accounts, manufacturing processes, operational information and sales program data."

Plaintiffs also claimed that defendants misappropriated proprietary information, were unjustly enriched by their wrongful conduct, engaged in conspiracy, unfair competition, and conversion, and tortiously interfered with their business relations and with their prospective economic advantage. As a result of these allegations, plaintiffs sought the following: compensatory and punitive damages; injunctive relief prohibiting defendants from interfering with its business; the imposition of a constructive trust; an accounting "from defendants . . . for all sales to customers of [Holdings] sold to by defendants" and "all manufacturing jobs [completed] for customers of [Holdings]"; and counsel fees. Defendants' answer asserted thirteen affirmative defenses, including estoppel, waiver, and laches, and cross-claimed against Millman.

The trial judge issued a written opinion and order on January 16, 2007, as a result of the parties' extensive summary judgment motions. The only relief he granted was to dismiss plaintiffs' conversion and conspiracy counts.

When the matter was tried to a jury, at the close of plaintiffs' case, on July 25, 2007, defendants made a motion for involuntary dismissal of the claims against them. The motion was granted as to plaintiffs' unjust enrichment claim, their breach of duty of loyalty claim, and the demand for punitive damages.

The jury rendered its verdict on July 31, 2007, finding that: (1) "defendants act[ed] in good faith in soliciting and selling to Target's former customers"; (2) Target's bankruptcy trustees' written assurance to Millman that she would not be joined in the lawsuit initiated years prior related to Target's bankruptcy proceedings amounted to misrepresentation; (3) defendants did not know and should not have known that Millman breached any confidence by soliciting and selling to Target's customers; and (4) "plaintiffs unreasonably delay[ed] in asserting their claims" and defendants were prejudiced by this delay. Accordingly, on August 13, 2007, the trial court entered judgment dismissing all of plaintiffs' remaining causes of action with prejudice.

On August 20, 2007, plaintiffs moved for judgment notwithstanding the verdict or, in the alternative, for a new trial. Defendants cross-moved for counsel fees and costs. All the requests for relief were denied; however, defendants were granted $4333.57 in costs. Thereafter, on July 25, 2008, the trial court denied plaintiffs' application for counsel fees that were incurred in opposing defendants' post-verdict motion for counsel fees and costs, as well as counsel fees incurred by plaintiffs for the expense of filing that application. This appeal and cross-appeal followed.

II.

Some history is necessary to an understanding of the issues on appeal. Target, a distributor of plastic bags, was founded by Martin Goz in 1975. Fox, initially only an investor in the company, became Target's director of development from 1993 until 1996 or 1997, when he and Goz had a falling out.

Fox had no knowledge of any confidentiality measures taken at Target during those years. Goz testified that Target salespeople, including Millman, had neither confidentiality agreements nor covenants not to compete. At Millman's deposition, which was read to the jury at trial, she testified that she signed neither a confidentiality agreement nor a covenant not to compete. According to Goz, there were no "written notices or guidelines with regard to keeping customer information secret" while he was Target's owner and president. It was the company's practice to allow employees to take their customers with them when they terminated their relationship with Target.

Millman was first hired at Target in March 1988. She was a commissioned salesperson who solicited customers by phone from her home in New Jersey and later in Florida. When deposed, Millman admitted signing the initial page of a document entitled "Target Industries Compensation Plan Summary July 1, 1988 to June 30, 1999 Confidential." She denied signing the last page, however, which would have established her agreement with the document's provisions. In any event, although Fox characterized the document as a confidentiality agreement, it contained neither provisions which created such an obligation nor a covenant not to compete. Rather, it related mainly to payment of commissions, including those due on sales occurring after a salesperson's last day of employment. It also required employees to return all physical property, including "correspondence[] and other papers/materials," to the company after the termination of employment. At trial, Fox admitted that the document did not contain a covenant not to compete, but he nonetheless characterized it as a confidentiality agreement even while being unable to identify any provisions having that effect.

Target filed a Chapter 11 bankruptcy petition on December 30, 1999. Goz subsequently fired Millman as a result of disputes related to Target customers. On September 8, 2000, counsel for Target's then Chapter 11 trustee wrote to Millman as follows:

We understand that you have advised some of Target's customers that Target is no longer in business and that you have attempted to solicit those customers' business for your own account. Your doing so is a violation of the Bankruptcy Code and may also violate your obligation to Target Industries under the terms of your employment as well as under applicable state law. Also, your statements that Target is no longer in business are completely false. The Chapter 11 Trustee is authorized to operate, and presently is operating, the Target Industries business. . . . Accordingly, your misrepresentations and statements are tortious and are interfering with the ongoing operations of Target's business.

We hereby demand that you cease and desist from all further contact with any customers of Target Industries, Inc. or its affiliated company, Lance Plastics, Inc. and any suppliers with whom Target does business. Moreover, we request that you preserve and gather for return to Target, the Chapter 11 Trustee or their authorized designee all office equipment (including all computers, computer accessories, software, fax machines, phones, desks, supplies and other materials), original files and credit cards which you obtained through your work for Target.

Polymer, also a distributor of industrial plastic bags, hired Millman effective September 11, 2000. She told Larry Lanham and Bill Lanham, Polymer's owners, that she had been a Target employee but that she was not subject to a non-compete or confidentiality agreement. She asserted that "she was a free agent" and assured her new employers they had no reason to inquire further of Target. Larry Lanham testified that if Millman had produced any written agreement restricting future sales, they would have forwarded the document to their attorney for review. He denied that Millman had produced a customer list from Target, and said that had such a list been produced by a new hire, he or she would have been fired on the spot.

Millman did, however, provide Polymer with a list, captioned "Customer List - Jean Millman (9/00)," of persons to whom Millman wanted notices sent advising that she now worked for Polymer. As Larry Lanham put it, Polymer "still had to go out and sell them. We still had to convince them that they should buy from us instead of who they're currently buying from. And we went through the normal sales process of soliciting business. She was free to do that." Use of the list also ensured that Millman was not going to solicit customers already being serviced by Polymer salespeople.

While at Polymer, Millman was paid forty percent of gross profits on all orders but no draw. Half of her health benefits were paid by Polymer but no contributions were made to any retirement fund on her behalf. Millman worked out of her Florida home and incurred few travel expenses, because she only visited Polymer's Ohio offices on rare occasions. Polymer paid for the phone, fax, and computer connections in her Florida home. Millman was not required to enter into a non-compete agreement as a condition of employment. She did, however, enter into a confidentiality agreement with Polymer; she would not use Polymer's confidential or proprietary information without its "prior written approval."

Millman generated sales for Polymer as follows: $184,054.02 from September 12 to December 31, 2000; $955,794.44 from January to December 31, 2001; $1,210,555.02 from January 1 to December 31, 2002; $988,485.97 from January 1 to December 31, 2003; $1,251,712.76 from January 1 to December 31, 2004; and $444,980.37 from January 1 to October 24, 2005. In other words, Millman generated approximately $5.2 million in sales for Polymer from September 2000 to October 2005. Millman left Polymer on October 1, 2004 as a result of the company taking five states away from her sales territory because other Polymer salespeople were already calling those accounts and her sales activities were creating conflicts within the company.

Target closed on March 16, 2001, and by March 19, 2001, all employees had been dismissed. Millman wrote to the bankruptcy judge on March 28, 2001, advising that Goz, Target's former Vice President Guy Zimmerman, and Target's salespeople, "have most likely been moving accounts and will be opening a new company called Target Industrial Packaging in Lafayette, NJ." In the letter she referred to transcripts of taped phone conversations she had previously forwarded to the judge that allegedly "reveal[ed] the deception that was probably taking place since September 2000" and "that the orders that slowly faded from Target Industries were probably due to them being farmed out to other suppliers outside the bankruptcy case." Millman copied the letter to Fox as well as to Alex Kress, counsel for Target's then Chapter 11 trustee.

Fox and Robert Wasserman, the Chapter 11 trustee for Target/Lance, on June 14, 2001, commenced a proceeding in the bankruptcy court against Goz Sr., Goz Jr., Target Industrial Packaging, and others, alleging in an eighteen-count complaint that they wrongfully diverted the debtor's assets. They sought injunctive relief, an accounting, disgorgement of Target's and Lance's assets and profits, and treble as well as punitive damages. Neither Millman nor Polymer was named as a defendant in the complaint.

In fact, in a June 18, 2001 letter to Millman, Wasserman wrote:

A lawsuit has been filed before the Bankruptcy Court in Newark against Martin Goz, his new entities and all of the former salespeople of Target who are now associated with Goz. I can represent to you that as promised, you have not been named as a Defendant in said suit. However, as part of our efforts to convince the Bankruptcy Court to issue an injunction prohibiting Goz and his new company from pirating the assets of Target, we have included copies of the transcript of the telephone conversations by and between you and Goz which [sic] you originally forwarded to Judge Gambardella. It is therefore imperative that you provide me copies of the actual tapes of the conversations at issue as originally promised. I really do not want to have to go through the mechanics of issuing a subpoena to have you produce the audio tapes. Your immediate cooperation will be most appreciated. Please advise.

On June 28, 2001, Fox purchased the Target assets including:

(f) all trade names, trade dress, customer artwork, printing plates, logos, customer product specifications, customer lists, price lists and other confidential and proprietary information and trade secrets of either of the Debtors ("Proprietary Assets").

In the June 29, 2001 bill of sale, Wasserman conveyed to Fox "all of Transferor's right, title and interest, AS IS, WHERE IS, without any warranty or representation of any kind . . . . "

It is undisputed that plaintiffs knew that Millman continued to sell in the field. In a May 7, 2001 letter to Kress, Wasserman wrote:

I took it upon myself to call Jean Millman who has agreed to provide me copies of the actual tape[d] conversations with Martin Goz. . . . In fact, I was a little surprised to hear that Millman is not inclined to work with Fox in that she claims that both John Rudy and John Fox contacted her and threatened action if she did not refrain from soliciting customers of Target. Millman tells me that the only customers that she has ever solicited were those that she originally brought to Target.

A former employee of Target testified on July 12, 2002, at depositions related to the bankruptcy case, that he thought Millman worked for a company called Polymer Systems somewhere in Ohio.

III.

The verdict sheet submitted to the jury began with these questions:

Question #1

Did Defendants act in good faith in soliciting and selling to Target's former customers?

YES:___ NO:___ VOTE:___

If you have answered question 1 "yes" then proceed to consider and answer question 2.

If you have answered question 1 "no" then proceed to consider and answer question 11.

Question #2

Did the bankruptcy trustee telling Jean Millman ("Millman") that she would not be joined in the pending lawsuit initiated June 14, 2001 amount to a misrepresentation?

YES:___ NO:___ VOTE:___

If you have answered question 2 "yes" then proceed to consider and answer question 3.

If you have answered question 2 "no" then proceed to consider and answer question 7.

Question #3

Did Polymer Packaging, Inc. ("Polymer"), Larry Lanham and Bill Lanham know or should they have known that Millman breached a confidence by soliciting and selling to Target's former customers?

YES:___ NO:___ VOTE:___

If you have answered question 3 "yes" then proceed to consider and answer question 4.

If you have answered question 3 "no" then proceed to consider and answer question 7.

Question #4

Would Polymer, Larry Lanham and Bill Lanham have hired Millman if they knew Plaintiffs intended to initiate the instant lawsuit?

YES:___ NO:___ VOTE:___

If you have answered question 4 "yes" then proceed to consider and answer question 5.

If you have answered question 4 "no" then proceed to consider and answer question 7.

Question #5

Did the bankruptcy trustee tell Jean Millman ("Millman") that she would not be joined in the pending lawsuit initiated June 14, 2001 with the intent that Millman rely upon it? YES:___ NO:___ VOTE:___

If you have answered question 5 "yes" then proceed to consider and answer question 6.

If you have answered question 5 "no" then proceed to consider and answer question 7.

Question #6

Did Defendants rely upon the misrepresentation to their detriment?

YES:___ NO:___ VOTE:___

If you have answered question 6 "yes" then cease your deliberations and return you[r] verdict.

If you have answered question 6 "no" then proceed to consider and answer question 7.

Question #7

Did Plaintiffs unreasonably delay in asserting their claims?

YES:___ NO:___ VOTE:___

If you have answered question 7 "yes" then proceed to consider and answer question 8.

If you have answered question 7 "no" then proceed to consider and answer question 9.

Question #8

Were Polymer Defendants prejudiced by Plaintiffs' delay in asserting their claims? YES:___ NO:___ VOTE:___

If you have answered question 8 "yes" then cease your deliberations and return your verdict.

If you have answered question 8 "no" then proceed to consider and answer question 9.

On July 31, 2007, the jury answered as follows:

1. Yes Vote: 5-1;

2. Yes Vote: 6-0;

3. No Vote: 5-1;

7. Yes Vote: 6-0;

8. Yes Vote: 6-0.

IV.

When the trial judge denied Polymer summary judgment on the issue of estoppel and laches, he opined:

The doctrine of laches equitably bars claims where there is an unreasonable delay in asserting a right that prejudices the other party. Lavin v. Bd. Of Educ. of the City of Hackensack, 90 N.J. 145, 151 (1982); Allstate v. Howard, 127 N.J. Super. 479, 489 (1974). In Knorr v. Smeal, 178 N.J. 169 (2003), the Court found a delay of fourteen (14) months to file an Affidavit of Merit was sufficient to warrant dismissal. In Lavin, the Court found a nine (9) year delay to sue for additional salary the plaintiff was statutorily entitled to was prejudicial and barred the claim.

Here, Plaintiffs delayed bringing suit against Defendants Polymer and the Lanhams for four (4) years. This delay was unreasonable and prejudiced Defendants by restricting their ability to reduce or eliminate their potential liability. Plaintiffs allege that Defendants failed to inquire of Target regarding any restrictions on Millman. Defendants were also put on notice when Millman was sued in the present litigation. However, even that suit came three (3) years after Millman had left Target and started with Polymer. Also, Goz or Zimmerman knew about Millman's sales position with Polymer but Plaintiff failed to ask them [about defendants] during their 2002 depositions. Finally, Defendants were entitled to rely upon Millman's representations that she was not bound by any confidentiality restrictions.

Polymer was not given reasonable, timely notice of any potential claims, so Polymer fostered a relationship with Millman that generated four (4) years worth of sales. These sales potentially increased Polymer's liability and costs to Plaintiffs.

Though the statute of limitations is six (6) years, Plaintiffs had the opportunity to pursue the present claims much earlier than 2005 and this delay exposed Polymer to a greater threat of liability. However, equitable relief is granted only where the party seeking such relief acted in good faith. Flammia v. Maller, 66 N.J. Super. 440, 455 (1962). As discussed supra, there are genuine issues of material fact whether Defendants acted wrongfully in regards to Plaintiffs' customers and sales information.

Since it is unclear whether Defendants are innocent victims, these equitable doctrines cannot be employed.

In a similar vein, when deciding Polymer's motion for involuntary dismissal, the judge said with reference to Polymer's duty of inquiry:

This is a case where Polymer and the Lanhams really do not find out until much later on, it would appear based on the proofs at this point, and their actions that they did take, the one they say they had a duty to inquire, having Millman come to them with ten year's experience from Target Industries, with a book of business, that one can argue that perhaps they . . . were on inquiry notice, even though she denied a confidentiality agreement had been signed, covenant not to compete had been signed.

That's a far stretch to put them to the point of where they're deliberately and specifically notified to cease and desist and they continue to do it [sic].

As a result, when the judge charged laches, he instructed the jury as follows:

Like waiver and estoppel, laches is an equitable doctrine, and such doctrines are generally applicable, only where the party seeking to assert it acted in good faith. The question of whether the doctrine of laches applies will be decided by the Judge, but in order for the Judge to decide the question, you must decide whether defendants acted in good faith, whether plaintiffs delayed unreasonably in asserting their claim, and whether Polymer defendants were prejudiced by plaintiffs' delay.

By a five-to-one vote, the jury found that defendants acted "in good faith in soliciting and selling to Target's former customers." By a unanimous vote the jury found that plaintiffs "unreasonably delay[ed] in asserting their claims" and that Polymer was prejudiced by the delay. Based upon the jury's finding, the judge ruled that laches applied and dismissed the amended complaint with prejudice.

In denying defendants' post-trial motion for judgment notwithstanding the verdict or for a new trial, the judge found no error in his submission of the laches affirmative defense to the jury even though the statute of limitations had not run. He wrote:

New Jersey Courts have regularly and recently held that the doctrine of laches may be invoked to prevent injustice even where a statute of limitations otherwise applies. See Lavin v. Board of Education, 90 N.J. 145, 152 n.1 (1982) (stating that, "the length of the delay alone or in conjunction with the other elements may result in laches," then referencing footnote 1, which states "because laches is an equitable principle aimed to promote justice, conditions or circumstances may make it inequitable to prosecute a claim after a period shorter than that fixed by the statute of limitations. Thus where there has been an unreasonable delay, laches has been applied to defeat a claim despite the fact that the time fixed by the analogous statute of limitation has not passed"); Mancini v. Twp. of Teaneck, 179 N.J. 425, 432 (2004) (finding that "the doctrine [of laches] is available as a defense in a [discrimination] action, even though a defined limitations period governs the LAD . . . because, as already noted, a continuing violation claim exposes a defendant to liability for acts that, standing alone, would fall outside the statute of limitations" and recognizing the principle established by Lavin above); and Northwest Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 141 (2001) (citing Lavin for the principle that "the central issue [in determining whether to apply laches] is whether it is inequitable to permit the claim to be enforced, that generally the change in conditions or relations of the parties coupled with the passage of time becomes the primary determinant"). None of these decisions, some of which Plaintiffs cite in support of their position, have interpreted the doctrine of laches to apply only in the absence of a statute of limitations.

In view of the above, the court further noted that

[t]he jury found that Plaintiffs delayed unreasonably in asserting their claims against the Polymer Defendants three to four years after Defendant Millman began working for Polymer, thereby depriving Defendants of the opportunity to assess such claims before accruing costs of business and millions of dollars in sales and profits to disputed customers. This is clearly an instance where reasonable minds could find that equity required the application of Defendants' laches defense, and therefore, the Court finds that no miscarriage of justice has occurred in this case.

The court rejected plaintiffs' argument that there could be no prejudice from the delay because they only sued "to recover profits from customer accounts that belong[ed] to them in the first place." The court reasoned that Polymer was "prejudiced in the sense that [it was] deprived of the opportunity to assess [Target's] claim prior to engaging in a four[-]year relationship with . . . Millman that cost . . . Polymer . . . time, money and exposure as such relationship became profitable." The court further noted that it "reserved for itself the decision" on "whether and how to apply the equitable defenses [only] after those essential facts had been found by the jury. . . ."

Finding that the jury's verdict was consistent with the weight of the evidence, the court concluded that "Millman's 'customer list' did not bear any indication of association with Plaintiffs or Millman's former employer." The judge further said that

Polymer . . . testified that they never saw this list until it was produced in this matter, more than five years after the fact, and acknowledged that such a list was probably submitted to Polymer's inside sales staff for the purpose of sending promotional literature and checking for conflicts with other salespeople.

Writing that "[k]nowledge is a crucial element in any misappropriation claim," the judge observed that

Plaintiffs were not able to prove that Polymer . . . had any knowledge that they were receiving confidential information or acting in any manner other than in good faith. Moreover, even if Polymer had previously entered into confidentiality agreements to protect its own confidential information, Polymer cannot reasonably be expected to assume that every other company in their industry takes the same measures. The jury evaluated three weeks of testimony on all of Plaintiffs' claims and, having full opportunity to assess the credibility of the Defendants and other witnesses during trial, decided that Polymer . . . acted in good faith in soliciting and selling to Target's former customers.

Not being persuaded that Polymer had a duty to inquire about Millman's prior employment, the judge stated that Polymer was entitled to rely upon Millman's assurances "and the jury, after hearing all the evidence, found that . . . Polymer . . . acted in good faith in such reliance."

V.

Plaintiffs' initial contentions involve their disagreement that the defense of laches was available to defendants. They assert that: (1) since the six-year statute of limitations, N.J.S.A. 2A:14-1, had not expired, the court erred by submitting the laches defense to the jury; (2) the court compounded the erroneous laches instruction by failing to instruct the jury "on defendants' duty of diligent inquiry"; (3) "the laches verdict [was] against the weight of the evidence"; and (4) "no detriment" was suffered by "the Polymer defendants."

The context in which we assess these claims is that the jury found that "[d]efendants act[ed] in good faith in soliciting and selling to Target's former customers," that defendants neither knew "nor should . . . have known that Millman breached a confidence by soliciting and selling to Target's former customers," and that the Polymer defendants were "prejudiced by [p]laintiffs' delay in asserting their claims." The jury specifically found that "[p]laintiffs unreasonably delay[ed] in asserting their claims" and that the bankruptcy trustees' letter to Millman advising her "that she would not be joined in the pending lawsuit" against Goz and the former Target employees was "a misrepresentation."

We do not agree with plaintiffs' premise that laches is an affirmative defense unavailable where a statute of limitations has not expired. As we recently said in Chance v. McCann, 405 N.J. Super. 547, 569 (App. Div. 2009), it "is the rare case in which an equitable defense of laches should be considered, despite the fact that the case was timely filed under the applicable statute of limitations." This is just such a case.

In Chance, the decedent Chance's estate obtained a judgment against McCann, decedent's former law partner, based upon a partnership dissolution agreement and an ancillary promissory note. Id. at 551-52. A dispute arose in connection with Chance's obligations under the agreement, which caused McCann to cease making his monthly buy-out payments in January 1999. Id. at 558. Chance died in February 2003, having never taken any legal action against McCann even though the buy-out payments stopped. Ibid.

Chance considers the doctrine of laches at some length. Id. at 567-69. Quoting from Knorr v. Smeal, 178 N.J. 169, 180-81 (2003), we wrote that this equitable doctrine is invoked to deny a party enforcement of a known right when the party engages in an inexcusable and unexplained delay in exercising that right to the prejudice of the other party. In re Kietur, 332 N.J. Super. 18, 28 (App. Div 2000) (citing County of Morris v. Fauver, 153 N.J. 80, 105 (1998)). Laches may only be enforced when the delaying party had sufficient opportunity to assert the right in the proper forum and the prejudiced party acted in good faith believing that the right had been abandoned. Dorchester Manor v. Borough of New Milford, 287 N.J. Super. 163, 172 (Law Div. 1994), aff'd, 287 N.J. Super. 114 (App. Div. 1996). The time constraints for the application of laches "are not fixed but are characteristically flexible." Lavin v. Bd. of Educ. of Hackensack, 90 N.J. 145, 151 (1982). The key factors to be considered in deciding whether to apply the doctrine are the length of the delay, the reasons for the delay, and the "changing conditions of either or both parties during the delay."

Id. at 152. The core equitable concern in applying laches is whether a party has been harmed by the delay. Id. at 152-53. [Id. at 567.]

We specifically mentioned that laches may be available even where the statute of limitations has not expired:

Laches is frequently described as "'an equitable defense that may be interposed in the absence of the statute of limitations.'" Borough of Princeton v. Bd. of Chosen Freeholders, 169 N.J. 135, 157 (2001) (quoting Nw. Covenant Med. Ctr. v. Fishman, 167 N.J. 123, 140 (2001)); Citizens Voices Ass'n v. Collings Lakes Civic Ass'n, 396 N.J. Super. 432, 442 (App. Div. 2007) (quoting the same language).

In Mancini v. Township of Teaneck, 179 N.J. 425, 432 (2004), the Court noted that it "typically" considers laches "in the absence of the statute of limitations." However, Mancini held that a laches defense is available in the context of those workplace sexual harassment cases under the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to -49, in which the doctrine of continuing violation works to extend the normal two-year statute of limitations. Mancini, supra, 179 N.J. at 430-32 . . . .

When there is both a legal and an equitable claim, "equity will generally follow the limitations statute." Lavin v. Bd. of Ed. of Hackensack, 90 N.J. 145, 152 n.1 (1982). However, in Lavin, the Court added:

Because laches is an equitable principle aimed to promote justice, conditions or circumstances may make it inequitable to prosecute a claim after a period shorter than that fixed by the statute of limitations. Thus where there has been an unreasonable delay, laches has been applied to defeat a claim despite the fact that the time fixed by the analogous statute of limitations has not passed. Patterson v. Hewitt, 195 U.S. 309, 319, 25 S.Ct. 35, 37, 49 L.Ed. 214, 218 (1904). Even if the cause of action in this case were deemed to be similar to a claim for breach of contract, it would be appropriate to consider the applicability of laches. [Ibid.] [Id. at 568-69.]

The following factors in Chance made a laches defense viable even though the statute of limitations had not expired:

Chance had four years within which to bring suit against McCann for failing to make the monthly payments called for by the partnership agreement. There appears to be no explanation in the record for his failure to do so, other than McCann's testimony that Chance conceded that he had breached the agreement himself and agreed to seek no further payments. McCann is significantly prejudiced by the fact that Chance is no longer living, both because Chance's testimony is no longer available and because McCann must now bear the enhanced burden of N.J.S.A. 2A:81-2*fn1 with respect to his own testimony about statements made by Chance. In addition, several other potential witnesses, including Chance's secretary and the banker involved in the refinancing, have passed away. [Id. at 569 (footnote omitted).]

A footnote in Chance states, "[t]he determination on laches must be made by the trial judge, although that judge could seek the guidance of the jury trying the substantive issues as an advisory jury." Id. at 570 n.9.

Millman commenced working for Polymer shortly after she was fired from Target in September 2000. At least as early as September 8, 2000, Wasserman, Target's trustee in bankruptcy, knew Millman had been soliciting Target's former customers. Fox and Wasserman filed in 2001 against Goz and others related to diversion of Target's assets. During depositions taken in 2002 by plaintiffs' counsel and attended by Fox, the two men learned from a former Target salesperson that Millman was employed by a company named Polymer located in Ohio. Nonetheless, plaintiffs did not sue Millman and her employer until January 2004. Meanwhile, Millman, for the period between September 2000 to October 2005, generated sales at Polymer of approximately $5.2 million.

Waiting for three years to sue Millman and four to sue Polymer constituted, in the view of the jury, an unreasonable delay. Furthermore, the jury found this unreasonable delay to have prejudiced defendants.

Given that the jury also found that defendants acted in good faith, in this case, like Chance, laches is an available defense although the statute had not expired. Plaintiffs inexplicably delayed exercising their rights to the prejudice of defendants despite having engaged in extensive litigation in 2001 against Goz and other former Target employees related to similar claims. Thus, we believe the judge did not err in refusing to strike Polymer's laches defense because the facts squarely fit into the Chance analysis. The jury's verdict and the judge's order with respect to laches should not be disturbed.

VI.

Plaintiffs further contend that the judge erred by failing to instruct the jury that Polymer had a duty to ask Target if Millman was using Target's confidential customer list. This argument too is without merit. Plaintiffs proffer no law in support of their position that a new employer has the responsibility to approach a prior employer to confirm the new hire's representations that they have neither a confidentiality or non-compete agreement from the prior employer.

Furthermore, Millman had no confidentiality or non-compete agreement from Target. This issue is lacking in merit and does not warrant further discussion. R. 2:11-3(e)(1)(E).

VII.

Plaintiffs contend that the judge also erred in his other jury instructions and that he submitted an improper verdict sheet to the jury. Specifically, plaintiffs aver the following:

(1) the judge erroneously adopted defendants' proposed verdict sheet that contained slanted and "leading" questions; (2) the judge erroneously submitted estoppel and waiver defenses to the jury because the evidence reflected that Polymer admitted "that [it] never relied on any statements or representations from Target or its representatives"; (3) the court erred in submitting a jury verdict sheet that allocated liability to Millman because the Joint Tortfeasor Contribution Law, N.J.S.A. 2A:53A-1 to -5, provides that "[a] master and servant or principal and agent shall be considered a single tortfeasor" and (4) the court erred in instructing the jury with respect to plaintiffs' tortious interference and unfair competition claims.

In his written opinion denying the motion for judgment notwithstanding the verdict, the judge addressed plaintiffs' contention that question two on the jury verdict sheet, "had no basis in fact, resulted in juror confusion, and elicited a finding by the jury that was legal error." Question two asked whether "the bankruptcy trustee telling Jean Millman . . . that she would not be joined in the pending lawsuit initiated June 14, 2001 amount[ed] to a misrepresentation?" The judge wrote that this was a proper factual question for the jury to consider because whether and when Plaintiffs had knowledge of Defendant Millman's intention to keep selling to customers she had brought to Target plays a significant role in the jury's determination of whether Plaintiffs were intentionally holding back claims against Defendants and, therefore, has bearing on the strength of Defendants' laches affirmative defense. Furthermore, even if the question regarding the trustee's misrepresentation [was] misplaced or [was] not a proper question for the jury, Plaintiffs have not shown any way that its presence or position could have altered the jury's findings that Polymer Defendants acted in good faith selling to Target's customers.

Further addressing plaintiffs' arguments revolving around the affirmative defenses, the judge noted: this Court finds that the affirmative defenses were properly positioned on the jury verdict sheet and that Plaintiffs' request for a charge specifically defining "malice" for a claim of tortious interference was unnecessary. Questions regarding the factual underpinnings of Defendants' affirmative defenses, such as whether Defendants[] acted in good faith, and considering that such defenses would have the effect of barring all of Plaintiffs' claims if successful, were properly presented as threshold questions at the beginning of the verdict sheet. As happened in this case, where the jury answered "yes" to certain of these questions, Plaintiffs' claim would be dismissed and further jury consideration would be unnecessary and of no consequence. Additionally, the jury charges sufficiently defined the required state of mind for malice, "such that harm was inflicted intentionally and without justification or excuse," rendering Plaintiffs' request unnecessary. Notably, the jury never reached the question of tortious interference and, therefore, an additional definition of "malice" would have had no impact on the result at trial.

Because the jury found that Polymer acted in good faith and that plaintiffs' action was barred by laches, plaintiffs' further attacks upon the charge and the remaining questions contained in the verdict sheet, which the jury did not reach, are academic.

Apart from the question concerning Wasserman's alleged misrepresentation to Millman pertaining to the laches defense, that interrogatory was otherwise not prejudicial to plaintiff. The jury did not answer question six, which asked whether defendants relied upon the misrepresentation to their detriment.

In addition, the jury's finding of Polymer's "good faith in soliciting and selling to Target's former customers," undercuts plaintiffs' arguments claiming errors with regard to the instructions for tortious interference and unfair competition. For example, one of the "elements of a cause of action for tortious interference with economic advantage" is the "intentional interference with [a] protected interest without justification." C&J Colonial Realty, Inc. v. Poughkeepsie Sav. Bank, FSB, 355 N.J. Super. 444, 478 (App. Div. 2002), certif. denied, 176 N.J. 73 (2003). The jury did not even answer verdict sheet questions with respect to tortious interference or unfair competition because it found that Polymer acted in good faith. Since the jury did not reach the questions, claims that the instructions issued in error are moot. Finally, because the issue of damages was never reached, verdict sheet questions upon the issue of damages attributable to Millman and Polymer were also rendered moot and need not have been answered by the jury.

VIII.

Plaintiffs assert it was error for the trial court to have dismissed its punitive damages claim. Punitive damages are awarded where a plaintiff proves, by clear and convincing evidence, "that the harm suffered was the result of the defendant's acts or omissions, and such acts or omissions were actuated by actual malice or accompanied by a wanton and willful disregard of persons who foreseeably might be harmed by those acts or omissions." N.J.S.A. 2A:15-5.12a.

Defendants' conduct in this case in no way can be characterized as fueled "by actual malice or accompanied by a wanton and willful disregard of" anyone's rights. See ibid. Defendants hired an employee who made accurate representations as to her obligations to her former employer. The company practice was that when a sales representative moved from one company to the next, he or she was free to take their customers with them if they could solicit orders at their new place of employment. Plaintiffs were aware of Millman's employment at Polymer for years before they took any action. There simply is no basis for a punitive damage award and the judge's dismissal of the prayer for relief was unassailable. Additionally, the jury's finding that defendants acted in good faith makes such damages unavailable.

IX.

Plaintiffs also claim that Lamorte Burns & Co., Inc. v. Walters, 167 N.J. 285 (2001), controls and that therefore judgment must be rendered, notwithstanding the verdict, in their favor. Lamorte, however, is an entirely different factual scenario. In that case, the plaintiff was in the business of investigating and adjusting maritime and non-maritime insurance claims. Id. at 291. Two of its employees began to collect information on Lamorte Burns's clients with the purpose of starting their own competing business. Id. at 293. One of them, unlike Millman, had actually signed a confidentiality agreement and a restrictive covenant. Id. at 291-92. The business that the two employees attempted to start was in direct competition with Lamorte, and as they worked at Lamorte they surreptitiously created a business file including "a target solicitations list" compiled "using information from their employer's client files." Id. at 293. The list "included client names, addresses, phone and fax numbers, file numbers, claim incident dates, contract information," and the like. Ibid. The information was actually transferred to one of their home computers as it was compiled. Ibid. The employees chose a particular date for their departure from Lamorte, and spent the weekend completing their plan. Id. at 294-95. They simultaneously faxed resignation letters and began to fax solicitation forms to all but one of the plaintiff's "P&I clients" the next morning, "thirty-three in all." Id. at 295. Within days, all thirty-three "requested transfer of their active claim files to" the defendants' new company. Id. at 295-96. This "weekend coup" was completely different from Millman's and the other defendants' conduct in this case. Lamorte is clearly distinguishable and does not entitle plaintiffs to reversal.

X.

In its cross-appeal, Polymer contends that the judge erred in denying its post-trial motion for fees, alleging that plaintiffs' suit was frivolous, and that the proofs Target asserted it would present to the jury to defeat defendants' motion for summary judgment were never produced. Defendants claim $364,521 in legal fees were incurred subsequent to the summary judgment application. Polymer further asserts that it made an offer of judgment based upon the approximate $4500 "value of a single order . . . placed with Target a few days before . . . Millman was fired" that she then took with her to Polymer.

We concur with the trial judge that despite the eventual absence of proofs and the jury's verdict, summary judgment was properly denied because plaintiffs were entitled to present to the jury their claims that the customer information was proprietary and that Millman's development of a client list constituted misappropriation of that proprietary material. In any event these claims are not the type envisioned by either N.J.S.A. 2A:15-59.1 or Rule 1:4-8. As the trial judge phrased it, "[t]his was a complicated matter, both in law and fact, and there were genuine issues of material fact that [p]laintiffs had a right to pursue. This pursuit ultimately required argument and determination by a jury." We agree and sustain the judge's decision to deny relief pursuant to the frivolous litigation statute and rule.

Defendants also contend that they are entitled to fees and costs pursuant to Rule 4:46-6. They further contend that Rule 4:58-2(a) and Rule 4:58-3(c) afford them relief because they made an offer of judgment. According to Polymer, it submitted a $5000 offer of judgment on January 25, 2006 and again on June 14, 2006, neither of which was accepted by Target. We concur with the trial judge that the rule presupposes the claimant recovering a money judgment favorable to the offeror. Plaintiffs' failure to recover any sum whatsoever would militate against a fee allowance against Polymer. We therefore agree with the judge's denial of Polymer's Rule 4:58 fee application.

XI.

Plaintiffs contend that they were entitled to counsel fees for the legal work involved in opposing Polymer's motion for fees. The trial judge in addressing this application stated that defendants did not exercise bad faith in bringing their motions "when I'm sure they felt relieved over the win, but greatly aggrieved over the cost in terms of attorney's fees and costs." Again, we concur.

Awards under Rule 1:4-8(b)(2) are discretionary with the court. See United Hearts, L.L.C. v. Zahabian, 407 N.J. Super. 379, 390 (App. Div. 2009) (applying an abuse of discretion standard to awards of attorneys' fees under Rule 1:4-8). Because the jury found that defendants acted in good faith, it cannot be said that Polymer frivolously applied for counsel fees. And the offer of judgment rule is not applicable when, pursuant to Rule 4:58-3(c)(1), "the claimant's claim is dismissed." Therefore, there was no abuse of discretion in the denial of Target's application for attorneys' fees incurred in opposing Polymer's motion for fees.

XII.

Lastly, defendants contend that the judge erred in partially denying their summary judgment motion and partially denying their motion for an involuntary dismissal at trial. Since the case was ultimately dismissed with prejudice, we consider the issues to be moot and will not discuss them further. See R. 2:11-3(e)(1)(E).

Affirmed.


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