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Fabrau, L.L.C., A Limited Liability Company of New Jersey, A/K/A v. Prashant Shah and Srinivisa Nallamatu

July 11, 2012

FABRAU, L.L.C., A LIMITED LIABILITY COMPANY OF NEW JERSEY, A/K/A ETUITIVE,*FN1 PLAINTIFF-APPELLANT,
v.
PRASHANT SHAH AND SRINIVISA NALLAMATU,*FN2 DEFENDANTS-RESPONDENTS.



On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-1202-10.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued February 28, 2012

Before Judges Payne, Reisner and Accurso.

Fabrau, L.L.C., appeals from a no-cause verdict that was entered following a bench trial of its complaint against two of its alleged members, Prashant Shah and Srinivisa Nallamotu seeking an injunction, liquidated damages and attorney's fees. Fabrau alleges that Shah and Nallamotu breached the confidentiality and non-competition provisions of Fabrau's operating agreement by attempting to sell government pricing software that was the property of Fabrau to Polaris Management, a venture capital firm. The court held that Shah and Nallamotu did not become members of Fabrau, and therefore, they did not breach Fabrau's operating agreement. We affirm.

I.

The record reveals that, in 2002, Laszlo Fabriczi and Vyasa Rau established a limited liability company that they registered as Fabrau, L.L.C. However, the business enterprise in which the company was to engage was unsuccessful, and the company remained dormant until late 2006 or early 2007, when Fabriczi and Rau became interested in developing low-cost, transparent software to assist in setting prices for pharmaceuticals sold by smaller pharmaceutical companies to government entities. The two men approached Chester Schwartz, a person with considerable sales experience in the pharmaceutical industry, and then, in late January 2007, they approached Nallamotu, who was working in government pricing for Hoffmann-La Roche, had just implemented a high-priced government pricing system known as I-many, and was similarly interested in a less expensive alternative for use by smaller companies. Initially, the men envisioned having the software for their product developed outside of the United States. However, when they determined that such a step would be cost-prohibitive, at Nallamotu's suggestion, they approached Nallamotu's friend, Shah, an experienced programmer, who joined the group in late February 2007.

As matters progressed, Shah agreed to develop a prototype government pricing system for Schwartz to use in marketing to customers that he had, at that point, allegedly lined up. It was planned that Shah and Nallamotu would focus on the technical aspects of the project, Schwartz would find the customers, and Fabriczi and Rau would work with those customers to customize the pricing system for their use. On April 1, 2007, Shah completed and delivered a prototype to Fabriczi, Rau and Nallamotu.

There is no evidence in the record that, prior to the time that the prototype was delivered, the parties had commenced to discuss a revenue-sharing agreement. However, it appears that, in April 2007, a draft amended operating agreement for Fabrau naming as members Fabriczi, Rau, Nallamotu, Schwartz, and Shah was circulated. In or around April 24, 2007, Shah referred the agreement to his attorney for comment, and at 12:15 p.m. on May 14, 2007, Shah sent an e-mail to Rau, Fabriczi and Nallamotu stating:

Is it possible to meet and discuss changes/additions that my lawyer suggested to the LLC document? It would be a good idea to meet and discuss them. Please let me know. Thanks.

Attached to the e-mail was a copy of the amended operating agreement containing multiple comments and proposed changes.

A further e-mail from Rau to Shah, Fabriczi and Nallamotu, dated May 15, 2007, appears in the record that states "Hey this is the document after our discussion last night." Although a document was attached, it is not identified in the record.

At some point, either before or after the May 14-15, 2007 exchange, an undated, draft operating agreement, containing a handwritten interpolated provision eliminating the requirement of capital contributions and establishing twenty-percent ownership shares for each partner, was executed by Fabriczi, Rau and Shah in a parking lot following either work or a meeting.

It was later signed by Schwartz, who was not present at the initial signing. The agreement was ...


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