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Hardenbergh, Canetti & Hill, Inc., A New Jersey Corporation, T/A Hch Real Estate v. Noreen Callahan

July 16, 2012


On appeal from the Superior Court of New Jersey, Law Division, Ocean County, Docket No. L-3728-06.

Per curiam.


Argued February 28, 2012

Before Judges Carchman, Fisher and Nugent.

This is an appeal from a jury verdict in this action involving claims of breach of contract and tortious interference with prospective economic advantage, resulting in a verdict for plaintiff Hardenbergh, Canetti & Hill, Inc. t/a HCR Real Estate (HCR or plaintiff) against defendants Noreen Callahan and Prudential Zack Realtors (PruZack).*fn1 Plaintiff alleged breach of a contractual provision pursuant to which Callahan, a real estate agent employed by plaintiff, was barred from soliciting plaintiff's customers for one year after she left plaintiff's employ. Plaintiff also sought recovery for fraudulent concealment of evidence based on a pretrial determination and spoliation of evidence.

The jury concluded that Callahan breached her contract with plaintiff but found for defendants on the remaining claims of tortious interference and a related conspiracy count. The jury awarded plaintiff $1752. As to the spoliation claim, the jury found that defendants fraudulently concealed evidence and awarded plaintiff $26,737.96. Plaintiff was also awarded $15,000 in counsel fees as a sanction for the spoliation, in addition to $7167 it had been awarded pursuant to a pre-trial determination.

On appeal, plaintiff focuses on the trial court's evidentiary rulings and jury instructions, as well as the sufficiency of the damages awarded. While we conclude that error occurred, we determine that many of the claims lose vitality as a result of the jury award, and to the extent that there was error, it was harmless. Accordingly, we affirm the judgment. We conclude that plaintiff was entitled to prejudgment interest and costs on the breach of contract award and remand for consideration of plaintiff's claim in this regard.


To provide a context for the rulings under review, we set forth an expansive statement of the facts adduced at trial.

Callahan was hired as a sales representative by plaintiff in 1999. She signed an independent contractor agreement on March 31, 1999, which contained a duty of loyalty clause. According to Thomas Cook, plaintiff's vice-president, the clause imposed a duty to keep all customer information and company policies and practices confidential. The contract protected non-public information about the company's finances, personnel, methods of operation, customers and clients.

Among its general conditions, the contract also included the following post-contract provisions:

18. Sales Representative agrees that, upon the termination of this Agreement, he will not, for a period of 12 months thereafter, either on his own or for any other person or entity (a) solicit, interfere with, or endeavor to cause any employee or sales representative of [HCH] to terminate his relationship with [HCH] or (b) induce or attempt to induce any employee or sales representative of [HCH] to breach his employment or sales representative agreement with [HCH].

19. Sales Representative agrees that, upon the termination of this Agreement, he will not, for a period of 12 months thereafter, solicit, induce, or attempt to induce any past or current customer of [HCH] (a) to cease doing business in whole or in part with or through [HCH] or (b) to do business with any other person or entity which performs services substantially similar to or competitive with those provided by [HCH].

21. Sales representative agrees to indemnify, defend and hold harmless [HCH] . . . from and against all claims, losses, liabilities and expenses, including but not limited to attorneys' fees and costs, arising from or related to (a) any breach of this Agreement by Sales Representative or (b) any negligent, reckless, or willful acts or omissions of Sales Representative. . . .

The agreement contained a provision addressing attorneys' fees: "In any successful action by [HCH] to enforce this Agreement, hch shall be entitled to recover its attorneys' fees and expenses incurred in such action."

Plaintiff kept track of customers, sales and rentals and stored listing agreements together with rolodex cards. These records were available to anyone who worked in the office but were considered confidential, as plaintiff did not want the information to go to its Long Beach Island competitors, such as PruZack.

According to Cook, plaintiff developed information for landlords relating to prospective customers. This information was entered into an in-house computer system program known as ProxSys, as well as a system known as HalSys, which was available to all realtors.

When one of plaintiff's agents and a cooperating broker were involved with a sale, the commission was split between plaintiff and the other broker, and plaintiff's agent received half of the commission received by plaintiff. When one of plaintiff's agents represented both the buyer and seller, the agent received fifty-five percent of the total commission paid to plaintiff. When two agents from plaintiff were involved, one representing the seller, the other representing the buyer, they split the fifty-percent commission. In addition, after earning $30,000 in sales commissions within a twelve-month period, an agent could earn an additional commission on a sliding scale of between twenty-five and thirty percent. With respect to rentals, plaintiff typically received a commission of twelve percent of the total lease, with the amount split between the company and the agent.

According to Cook, at one point in 2003, Callahan, one of plaintiff's top producers and commission earners, complained that she should have received a larger commission on a transaction. She wanted the graduated commission schedule to apply to the transaction because she believed other realtors gave their agents graduated commissions on all transactions.

Callahan met with Kevin Thomas, PruZack's chief executive officer, on June 15, 2005, to discuss working for PruZack, which meeting was followed up by an offer. According to Cook, on June 24, 2005, Callahan "barged" into his office and complained that she deserved more money on a transaction -- sixty-five percent rather than the usual fifty percent commission -- because of how hard she had worked. Cook told her he could not give her more because that would not be fair to the other agents.

On July 23 or 24, 2005, Callahan verbally accepted Thomas' offer to work for PruZack. She did not tell plaintiff at that time because she wanted to stay with plaintiff until a sale (the Cave-Sobel sale) closed so that she could get her $65,000 commission. The sale was scheduled to close on July 27 or 28. Callahan claimed that she complained to Cook about the lack of a graduated commission on the Cave-Sobel sale, but he told her to "leave it alone."

Dennis O'Brien, a former agent with plaintiff, noted that Callahan complained to him about the commissions in the early spring of 2005. In July he noticed that Callahan had canceled at least two of plaintiff's rentals on the rental board and had rebooked them with PruZack. After Callahan went to PruZack, she told O'Brien that she had told customers that plaintiff would be out of business within a year.

Another agent with plaintiff, Kathryn Smith, believed that Callahan was leaving plaintiff by mid-June 2005 because Smith would see her copying records for fifteen or twenty minutes at a time. In mid-July, Smith saw boxes of documents in Callahan's van. Other employees saw Callahan with master file drawers of tenant cards and other records not normally removed from the file room. Employees noted that Callahan made entries under PruZack's name on the rental board.

On July 27, 2005, Cook's wife, Gail, saw an entry on the rental board, with the words "per Noreen [Callahan]" whited-out.

Gail told her husband, who was "astonished" and understood this to mean that Callahan would leave plaintiff and work for PruZack.

Callahan acknowledged that she canceled one reservation on the rental board but denied whiting out her name and writing in PruZack. In fact, Callahan came to Cook's office to explain that she had merely corrected an error on the rental board. She told the Cooks that she was uncomfortable because they had not spoken to her in the past few weeks, and that she was speaking to other real estate agencies. Cook decided to fire Callahan and drafted a termination agreement, which Callahan refused to sign.

When she left the office, Callahan took her personal belongings, as well as some three hundred prospect cards and a year's worth of leases that she had copied. She claimed that she took the prospect cards because she believed they were hers. She informed Cook that she was joining PruZack.

After the termination of Callahan's employment, Cook found only a dozen of the three hundred tenant cards Callahan had possessed during her employment with plaintiff. Cook also claimed that Callahan took a year's worth of leases with her when she left.

On July 29, 2005, Callahan signed an independent contractor agreement with PruZack and began working for the company on August 1, 2005. She claimed that she did not realize, or remember, that there were competition restrictions in her agreement with plaintiff.

Plaintiff contacted its customers within three or four days after Callahan left to inform them of her departure and to assess their interest in remaining clients and customers of the company. Cook acknowledged that it is a maxim in the real estate industry that customers ...

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