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Engine Distributors Incorporated v. John J. Mcdonnell

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION


December 30, 2010

ENGINE DISTRIBUTORS INCORPORATED, PLAINTIFF-APPELLANT CROSS-RESPONDENT,
v.
JOHN J. MCDONNELL, DEFENDANT-RESPONDENT CROSS-APPELLANT, AND ENGINE POWER SOURCE, DEFENDANT-RESPONDENT.

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-16-07.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Submitted October 26, 2010 -- Decided Before Judges Skillman, Yannotti and Espinosa.

Plaintiff Engine Distributors, Incorporated (EDI) appeals from an order entered by the Law Division on October 16, 2009, dismissing its amended complaint with prejudice, and an order entered by the court on December 4, 2009, which denied its motion for reconsideration. Defendant John J. McDonnell (McDonnell) cross-appeals from the October 16, 2009 order, which also dismissed his counterclaim with prejudice. For the reasons that follow, we affirm on the appeal and dismiss the cross-appeal.

I.

EDI is a corporation that is in the business of selling and distributing gasoline and diesel engine products. McDonnell worked at EDI for more than thirty years. In February 1987, McDonnell signed a Confidentiality and Non-Disclosure Agreement, which stated that during and after his employment at EDI, he would not disclose EDI's confidential information to any third party or make use of such information in a manner that would be detrimental to EDI. The agreement defined "confidential information" to mean [t]he names and addresses and purchasing history of EDI's customers; the name and other pertinent data concerning the persons responsible for purchasing for such customers; the particular needs and applications of such customers for EDI products; information relating to EDI products, whether presently marketed or in the process of development; research developments, marketing practices, and other business data.

In 1996, EDI began to develop certain products for the purpose of entering the market for wood chipper engines that are suitable for use by tree-trimming companies throughout the United States. According to EDI, McDonnell was involved in the development and sale of this product and engaged in the solicitation of sales to Woodchuck, Inc. (Woodchuck), which ultimately became EDI's largest purchaser of the wood chipper engines.

In August 2002, EDI terminated McDonnell's employment and he went to work for defendant Engine Power Source (EPS). At that time, EPS was not in competition with EDI in the wood chipper engine market. However, EDI claims that soon after McDonnell joined EPS, he began to contact customers who purchased EDI's wood chipper engines.

In May 2003, McDonnell commenced an action against EDI in the United States District Court for the District of New Jersey, in which he alleged that EDI had discriminated against him on the basis of his age in violation of the Age Discrimination in Employment Act, 29 U.S.C.A. § 621 to 634, and the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 to -49 (NJLAD). In June 2006, EDI and McDonnell settled the case. Thereafter, McDonnell filed a motion to enforce the settlement, which EDI opposed.

In December 2006, EDI filed this action against McDonnell, in which it asserted claims for breach of contract and tortious interference with its business relationships. EDI alleged that McDonnell had taken its confidential information and used that information to "lure" Woodchuck away from EDI. McDonnell filed a counterclaim, in which he alleged that EDI violated the NJLAD by commencing this action in retaliation for his federal court age-discrimination lawsuit. EDI subsequently filed an amended complaint naming EPS as a defendant.

In the federal action, the district court conducted an evidentiary hearing on McDonnell's motion to enforce the settlement. On January 16, 2007, the district court filed an opinion concluding that EDI had authorized its attorney to enter into the settlement, and the settlement agreement did not lack any essential terms. The district court entered an order dated January 16, 2007, enforcing the settlement.

EDI filed a motion for reconsideration of the district court's January 16, 2007 order, and McDonnell filed a cross- motion for entry of judgment and for civil contempt. On September 24, 2007, the district court filed an opinion in which it found that there was no basis for reconsideration of its earlier order enforcing the settlement.

The district court entered an order denying EDI's motion and granting in part McDonnell's cross-motion for entry of a judgment and for civil contempt. EDI appealed to the United States Court of Appeals for the Third Circuit, which filed an opinion dated March 18, 2009, affirming the district court's orders.

After the completion of discovery in this case, EDI filed a motion for summary judgment on McDonnell's counterclaim. The motion judge entered an order on December 19, 2008, denying the motion. Later, defendants filed a motion for summary judgment seeking dismissal of EDI's claims. The motion judge entered an order dated March 6, 2009, denying the motion. Defendants filed a motion for reconsideration, which the motion judge denied by order entered on April 3, 2009.

The case was initially scheduled for trial on May 4, 2009. Prior to the scheduled trial date, the parties filed with the court their respective pre-trial information exchanges pursuant to Rule 4:25-7(b). EDI's submission included motions in limine to: bar defendants from re-litigating the federal case; preclude defendants from making any reference to the district court's decisions in the federal action; and bar defendants from referring to a January 19, 2007, letter from EDI's counsel concerning the settlement of the federal case. EDI also sought a determination by the court that McDonnell's NJLAD counterclaim was barred as a matter of law.

In addition, defendants submitted a motion in limine to preclude EDI from presenting testimony from its expert on damages because his report was a net opinion. In its response to defendants' motion to bar testimony of its expert, EDI argued that its allegations support the fact that McDonnell used his confidential information, in breach of his confidentiality agreement, to secure the Woodchuck account and deprive EDI of its profits for the foreseeable future.

Defendants['] efforts to discount [p]laintiff's expert report does not take into account that EDI [did not] lose Woodchuck by [its] own act in stopping shipment of product. It was due to EPS' premature entry into the market giving Woodchuck an alternative to buy from [it] and not pay EDI . . . .

The parties appeared for trial on May 4, 2009. The court adjourned the trial date to August 24, 2009, and set the matter down for a hearing to resolve the many pre-trial issues that had been identified by the parties. Prior to the trial date, defendants filed on July 28, 2009, a motion seeking reconsideration of the court's earlier determination that there were disputed issues of fact as to whether a confidentiality agreement existed between EDI and McDonnell, and another motion in limine to bar testimony from EDI's expert on damages.

In the brief submitted on the latter motion, defendants argued that EDI's claims were based entirely on its loss of the contract to sell 1000 wood chipper engines in 2006 and in the following nine years. Defendants argued that EDI's damage claims were speculative.

Defendants asserted that although Woodchuck had submitted an order to EDI to purchase 1000 wood chipper engine packages in 2006, EDI had "decided to stop shipping product after shipping only 81 units." Defendants also asserted that the 1000 unit benchmark for sales was speculative since EPS only sold Woodchuck 159 units in 2006, and Woodchuck had serious financial "issues" at the time and ceased to exist after January 1, 2007, when it was acquired by Altec, Inc. (Altec).

EDI opposed defendants' motions. EDI again maintained that it did not lose the Woodchuck account in 2006 because it stopped shipping its machines to Woodchuck. EDI stated that it lost the Woodchuck account because of EPS's premature entry into the wood chipper engine market, which allegedly gave Woodchuck an alternative to buy the machines from EPS and not pay EDI before it was acquired by Altec.

Trial in the matter was scheduled to begin on October 5, 2009, and the matter assigned to another judge. On that date, the trial judge stated on the record that before he began a lengthy trial in the dispute, he was inclined to revisit some of the earlier decisions in the case, specifically whether there was sufficient evidence to support EDI's claims and whether McDonnell's NJLAD counterclaim was legally viable. Counsel for the parties engaged in a lengthy argument of these issues, with reference to the previously-filed proposed trial evidence, which included an extensive array of documents and excerpts from deposition testimony.

The trial judge then placed his decision on the record. The judge found that the proffered evidence only permitted a reasonable fact finder to conclude that EDI had terminated its business relationship with Woodchuck in 2006 because Woodchuck failed to pay EDI for the machines that EDI had shipped to it. The judge stated that "there is insufficient evidence [from which] the fact finder can conclude that inappropriate conduct on the part of McDonnell was a proximate cause of [EDI] losing" the Woodchuck account.

The judge also addressed McDonnell's counterclaim for retaliation under the NJLAD. The judge found that McDonnell had not established a sufficient factual connection between the filing of his federal court age discrimination lawsuit in 2003 and EDI's filing of this action several years later. The court concluded that EDI's filing of this lawsuit could not be considered unlawful retaliation in violation of the NJLAD.

The trial judge accordingly entered an order dated October 16, 2009, dismissing EDI's amended complaint and McDonnell's counterclaim with prejudice. EDI thereafter filed a motion for reconsideration, which the judge denied by order dated December 4, 2009. This appeal and cross-appeal followed.

II.

EDI first argues that the dismissal of its amended complaint was procedurally improper. We disagree.

A court has the inherent power, in the exercise of its discretion, to reconsider any prior order in a case. Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 257 (App. Div. 1987), certif. denied, 110 N.J. 196 (1988). In this matter, the trial judge exercised his discretion to reconsider the motion judge's prior order denying defendants' motion for summary judgment. We are satisfied that the judge did not abuse his discretion by doing so.

Here, defendants' pre-trial motions to bar testimony from EDI's expert on damages raised the question of whether there was sufficient evidence to support the expert's opinions. However, those motions also raised the question of whether there was sufficient evidence to support EDI's claims. Although defendants did not explicitly seek reconsideration of the motion judge's order denying their motion for summary judgment, that was implicit in their motions.

Moreover, prior to the scheduled trial date, the parties filed with the court their respective pre-trial information exchanges. The parties thus provided the trial judge with all of the evidence necessary to reconsider the motion judge's order. Furthermore, the trial judge observed that the trial in the matter would be lengthy. We are satisfied that, under these circumstances, reconsideration of the motion judge's order was proper.

EDI argues, however, that Rule 4:37-2(b) required the trial judge to allow it to present its evidence before a jury before entertaining a motion by defendants for involuntary dismissal of its claims. Although the trial judge could have proceeded in that manner, he was not required to do so. Rule 4:37-2(b) does not preclude a trial judge from reconsidering an order previously entered in the case denying a party's summary judgment motion before commencing a trial.

EDI argues, however, that it was not afforded notice and the opportunity to be heard. We disagree. The record shows that defendants' pre-trial motions provided EDI with sufficient notice that defendants were seeking a determination prior to trial that there was insufficient evidence to support the opinion of its expert on damages. In their briefs, defendants also argued that there was insufficient evidence for EDI's claims. EDI therefore could reasonably anticipate that in ruling on defendants' motions, the judge could reconsider the motion judge's order denying defendants' motion for summary judgment.

Moreover, defendants' motions were filed months before the October 5, 2009, trial date, and EDI responded to the motions in writing. Indeed, as we have pointed out, in the briefs that it filed in response to defendants' motions, EDI argued that its evidence was sufficient to support its claims. Furthermore, when the trial judge elected to reconsider the motion judge's order, he gave the parties an opportunity for extensive oral argument.

EDI argues that our decision in Klier v. Sordoni Skanska Constr. Co., 337 N.J. Super. 76 (App. Div. 2001) requires reversal of the trial court's dismissal order. In Klier, the plaintiff, Robert Klier, Sr. (Klier), was injured during the course of his employment by a subcontractor on a construction project. Id. at 80. Klier asserted a claim against the general contractor, Sordoni Skanska Construction Company (Sordoni). Ibid. Klier's wife also asserted a derivative per quod claim. Ibid.

When the case was called for trial, the trial judge stated that he had "serious concerns" about the case and decided to consider whether the evidence supported Klier's claim against Sordoni. Id. at 81. The plaintiffs' attorney placed on the record the evidence that he intended to present at trial. Id. at 82. Counsel informed the court, however, that he had not been prepared to argue the motion and he did not have his file or his expert's report. Ibid.

The trial court adjourned the argument for two days to give counsel an opportunity to prepare and present his expert report. Ibid. After hearing further argument on the matter, the court determined that the evidence was insufficient to support Klier's claim against Sordoni and dismissed plaintiffs' complaint. Ibid. The plaintiffs filed a motion for reconsideration, which the court denied. Ibid. The plaintiffs appealed. Id. at 80.

We reversed and remanded the matter for further proceedings. Id. at 80. We held that the trial court erred by instituting sua sponte the summary procedure and dismissing the complaint. Id. at 83. We noted that, at a minimum, due process required that the plaintiffs be afforded notice and "an opportunity to be heard at a meaningful time and in a meaningful manner." Id. at 84.

We additionally noted that our rules generally require motions to be filed sixteen days before a specified return date, and summary judgment motions be filed no later than twenty-eight days before the return date. Ibid. We stated:

The purpose of these rules is obvious, that is, to afford the party against whom relief is sought notice of the application, together with a meaningful opportunity to respond. The procedure resorted to by the trial judge in this case defeated those purposes. For example, had defendants filed a motion, plaintiffs would have had the opportunity to respond to the objection to their expert's opinion. Instead, plaintiff came to court prepared to pick a jury, but rather, was required to defend a motion, brought by the court sua sponte, to dismiss his complaint. [Ibid.]

We also said that, while the trial judge had adjourned the argument to allow the plaintiffs' attorney to produce his expert report and to further argue the motion, this was "insufficient to remedy the defect in the judge's procedure." Ibid.

We are satisfied that EDI's reliance upon Klier is misplaced. In this case, the trial judge reconsidered an earlier order denying a motion for summary judgment, whereas in Klier, the trial judge chose to summarily dismiss the plaintiff's complaint even though a motion for summary judgment had never been made. Furthermore, in this case, defendants filed pre-trial motions that raised the issue of whether there was sufficient evidence to support EDI's claims, which was not the case in Klier. EDI responded to those arguments. In addition, unlike the situation in Klier, in this case, the court afforded EDI an opportunity to be heard "at a meaningful time and in a meaningful manner." Ibid.

We note additionally that EDI's complaint about the trial judge's procedure is inconsistent with its own request that the judge decide its motion to dismiss McDonnell's NJLAD retaliation counterclaim prior to trial. As noted previously, the judge considered EDI's motion and dismissed the counterclaim. Therefore, EDI should not be heard to complain that the trial judge followed the same procedure when it addressed defendants' motion to dismiss EDI's claims.

III.

We turn to EDI's argument that the trial judge erred by dismissing its claims. EDI contends that it presented sufficient evidence to allow a jury to consider its claims for breach of contract and tortious interference. Again, we disagree. We are satisfied that, based on the evidential materials before it, and giving EDI the benefit of all favorable inferences that could be drawn from that evidence, the trial judge correctly found that EDI had not established a right to relief on its claims.

As we previously explained, EDI alleges that it lost the sales of its wood chipper machines to Woodchuck because of defendants' wrongdoing, specifically, their use of confidential information that McDonnell had acquired during his employment with EDI. EDI alleges that it anticipated selling 1000 of its products to Woodchuck in 2006 and 1000 more in each of the following nine years.

The trial judge found that EDI's claims failed as a matter of law because the proffered evidence allowed the trier of fact to reach one conclusion, specifically, that EDI lost Woodchuck's business because EDI decided to stop selling its machines to Woodchuck in 2006. We are convinced that the trial judge's conclusion is supported by the record.

Glenn Cummins, Jr. (Cummins) was at the relevant time EDI's principal. At his deposition, Cummins was asked to state the reason EDI stopped selling its product to Woodchuck in 2006. Cummins testified that Woodchuck had not been paying its bills. Cummins stated, "You don't sell to customers who can't pay." Cummins further testified that in 2006, EDI "shut the [Woodchuck] account down . . . [f]or non-payment."

Cummins further testified that in February and March of 2006, EDI stopped shipping its products to Woodchuck because it had not been paying for the products shipped to it in 2006. He stated that Woodchuck had not paid anything on the 2006 order. Cummins testified that "[Woodchuck] paid nothing against it. That's why we shut them down."

In response to further questions on this point, Cummins again stated that EDI stopped shipping to Woodchuck because Woodchuck had not paid EDI for the engines shipped to it in 2006. Cummins said that he "had previously written off a sum of money so [he] wasn't going to go down that road again." Cummins reiterated that EDI stopped shipping its engines to Woodchuck because Woodchuck had not paid EDI's bills. Cummins stated that EDI had decided that Woodchuck had told "enough stories" and EDI was "tired of it and elected to get out of the business."

Thus, Cummins repeatedly and unequivocally stated that EDI stopped selling its engines to Woodchuck because Woodchuck did not pay for the engines that EDI shipped to Woodchuck in 2006. In light of that testimony, the trial judge properly found that a reasonable fact finder could only find that EDI lost Woodchuck's account because it stopped selling its machines to Woodchuck, and not because of any wrongdoing on the part of defendants.

After the trial judge dismissed EDI's amended complaint, EDI filed a motion for reconsideration. In support of its motion, EDI submitted an affidavit by Cummins dated October 28, 2009. In his affidavit, Cummins stated, among other things, that EDI "had payment issues with Woodchuck in the past, but never to the point where it would stop requesting engines[.]" Cummins also stated that he would testify that he "did not unilaterally shut-down the Woodchuck account[.]"

According to Cummins, "EDI simply stopped shipping because no new requests were forthcoming from Woodchuck, hence the account was shut down for non-payment and not requesting additional engines." Cummins stated that he believed "EPS proximately caused the lost Woodchuck account because without EPS as a competitor, Woodchuck would not have been able to buy a competing product and not fulfill its 1000 purchase order with EDI[.]"

We are satisfied that Cummins' affidavit failed to raise a genuine issue of material fact as to whether EDI's loss of the Woodchuck account was due in whole or in part to some wrongdoing on the part of defendants. The "sham affidavit rule" allows a court to disregard an affidavit that is submitted in response to a summary judgment motion, when the affidavit contradicts the affiant's deposition testimony. Shelcusky v. Garjulio, 172 N.J. 185, 194 (2002). A court may, however, consider the affidavit if the affiant provides a reasonable explanation for the inconsistencies. Id. at 204.

As we have explained, Cummins was deposed. He testified that EDI stopped shipping its machines to Woodchuck because Woodchuck failed to pay its bills. Cummins never suggested that EDI lost the Woodchuck account for any other reason. Moreover, in his affidavit, Cummins did not explain the inconsistency between his deposition testimony and the statements about the loss of the Woodchuck account in his affidavit. Therefore, Cummins' affidavit was insufficient to raise a genuine issue of material fact as to the reason why EDI lost the Woodchuck account.

EDI argues, however, that it presented sufficient evidence to show that defendants used its confidential information in order to market its machines to Woodchuck. EDI contends that EPS was not in the wood chipper engine market when it hired McDonnell. It says that EPS wanted McDonnell to expand its wood chipper machine package and use the confidential information he had gained at EDI in violation of his confidentiality agreement. EDI claims that its evidence was sufficient to show that McDonnell and EPS were using EDI's confidential customer lists, pricing structure and marketing plan to get its product to market "at lightning speed."

EDI additionally claims that EPS came into the wood chipper engine market in 2003, soon after McDonnell began working for EPS, and its sales to Woodchuck "exploded" in 2006. According to EDI, it presented sufficient evidence to establish that McDonnell used his confidential information in breach of the confidentiality agreement to secure the Woodchuck account and deprive EDI of the profits from that account "for the foreseeable future."

As the trial judge found, however, the evidence established that EDI lost the Woodchuck account because EDI chose to stop doing business with Woodchuck. In light of that essentially undisputed fact, the trial court correctly found that EDI's claims for breach of contract and tortious interference failed as a matter of law.

IV.

We turn to McDonnell's cross-appeal from the order dismissing his counterclaim with prejudice. McDonnell only seeks reinstatement of his counterclaim in the event the court were to reverse and reinstate EDI's claims. Since we have determined that the dismissal of EDI's claims was procedurally proper and supported by the record, McDonnell's counterclaim must be dismissed.

Affirmed on the appeal; and the cross-appeal is dismissed.

20101230

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