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Fulton v. Sunhillo Corp.

Superior Court of New Jersey, Appellate Division

November 18, 2013

RONALD L. FULTON, Plaintiff-Appellant/ Cross-Respondent,
SUNHILLO CORPORATION, Defendant-Respondent/ Cross-Appellant.


Submitted October 9, 2013

On appeal from the Superior Court of New Jersey, Law Division, Camden County, Docket No. L-5310-09.

Ronald L. Fulton, appellant/cross-respondent pro se. [1]

Archer & Greiner, P.C., attorneys for respondent/cross-appellant (Peter L. Frattarelli and Douglas Diaz, on the briefs).

Before Judges Grall, Waugh, and Nugent.


Plaintiff Ronald Fulton appeals the Law Division's order granting summary judgment dismissing his amended complaint against defendant Sunhillo Corporation. Although he stated other causes of action, Fulton's primary allegation was that Sunhillo fired him in violation of the Conscientious Employee Protection Act (CEPA), N.J.S.A. 34:19-1 to -8, because he raised concerns about its compliance with laws governing exports of electronic equipment from the United States. Sunhillo cross-appeals from the denial of its application for counsel fees and costs pursuant to Rule 1:4-8 and N.J.S.A. 2A:15-59.1, which allow recovery of fees and costs for frivolous litigation. We affirm the order of dismissal, but remand the frivolous litigation issue for further consideration and explanation by the motion judge.


We discern the following facts and procedural history from the record on appeal, and particularly the motion judge's findings of undisputed material facts. Recognizing his obligation to search the record, Leang v. Jersey City Bd. of Educ., 399 N.J.Super. 329, 357-58 (App. Div. 2008), rev'd on other grounds, 198 N.J. 557, 568 n.2 (2009), the motion judge developed a list of undisputed facts, which he then used in his analysis of the summary judgment motion. We outline them below.


Sunhillo designs and manufactures data-communications products for the aviation industry. In late 2007 it decided to seek a sales executive who could generate significant sales from new customers and markets. Sunhillo engaged the services of a recruiting firm, which performed a sales assessment of Fulton and recommended him to Sunhillo. After a series of interviews, Sunhillo hired Fulton as "Director of Business Development" in December 2007.

Fulton's compensation package included an annual salary of $115, 000, 2.5% commissions on sales to new customers, an employee stock-option plan, and other benefits. The commission plan set a sales target of three million dollars for 2008.

Fulton generated no sales from new business in 2008. He acknowledged at his deposition that he was hired to be "a new business developer, so [his] assumption was [Sunhillo] wanted [him] to develop new markets." In addition, Fulton testified that he could not recall whether he brought in any new clients in 2008 or whether he completed any sales that year. Fulton was also unable to recall whether he sought any commissions for 2008. His salary was not raised after his first year at Sunhillo.

As a result of his failure to produce new business, Fulton was asked to assist with Sunhillo's marketing efforts. He travelled to China in November and December 2008 for that purpose, with specific emphasis on products referred to as "Real Time Interface & Conversion Items" (RICI).[2] Fulton met with representatives of a Chinese company with which Sunhillo had previously done business. He wrote and submitted a report and proposal concerning the possibility of marketing in China.

Sunhillo resumed sales to the Chinese company in late 2008. According to Fulton, he raised concerns during late 2008 and early 2009 about whether Sunhillo was complying with federal export requirements for equipment such as RICI. Sunhillo began to explore the compliance issue. Fulton attended a meeting, which included Robert Walczak, Sunhillo's senior vice president, in late January to discuss the issue. Sunhillo designated one of its employees to be the export compliance manager. In March Sunhillo sent the compliance manager and Fulton to a seminar concerning export regulations and compliance. Sunhillo also decided to conduct an internal review of its products and export-control classifications.

According to Fulton, he recommended that Sunhillo have an expert look at its export compliance program. At his deposition, he testified that the recommendation was "driven by me and actually more so by Sylvia Pivinski, " a Sunhillo employee who had conducted research on export compliance laws. She and Fulton expressed concerns about whether Sunhillo was in compliance with the law and recommended retention of a law firm to analyze the laws as they applied to Sunhillo.

Sunhillo engaged a law firm in early April to review compliance issues concerning RICI products. The law firm was also asked for an analysis of issues regarding the International Traffic and Arms Regulations (ITAR) because Fulton expressed concern that some of Sunhillo's products could be characterized as a controlled item under ITAR.

Sunhillo executives began reconsidering Fulton's employment in May 2009. At that time, he had still not generated any new business or completed any new sales, as he conceded at his deposition. He also conceded that he had not submitted any requests for commissions in 2009.

In August, Sunhillo executives had a more general discussion about staff reductions, during which they specifically considered Fulton, another employee who was a software engineer, and a consultancy agreement that was about to expire. The executives decided to lay off Fulton and the software engineer. Fulton had not generated new business, which was what he was hired to do, and they concluded that Sunhillo did not need an additional marketing employee at Fulton's salary. They took no action at that time.

At the end of August, the law firm provided advice that RICI equipment should be classified as an encryption item, which requires a license for exportation to any country other than Canada. The law firm further advised Sunhillo that some of its sales to the Chinese company did not appear to qualify for a licensure exemption and recommended voluntary disclosure of the sales to the Bureau of Industry and Security (BIS) in the United States Department of Commerce. According to Fulton, he agreed with the recommendation for disclosure.

In September, Sunhillo executives acted on their earlier decision to terminate Fulton and the software engineer. The consultant discussed at the August meeting was terminated in November. Fulton was terminated on September 21. Pivinski, whom Fulton had described as "driving" the concern about export compliance more than he did, was not terminated.

Because the encryption item that the law firm concluded required licensure had been disabled prior to sale, Sunhillo decided to seek a second opinion from another law firm. In January 2010, the second law firm sought guidance directly from BIS. At the same time, Sunhillo made a voluntary disclosure of the earlier shipments to the Chinese company. BIS notified Sunhillo in August 2010 that no export license was required for the products at issue and that there had been no violation with respect to the prior sales.


Fulton filed a complaint against Sunhillo in October 2009. He alleged that he had been terminated in violation of CEPA because of his whistleblowing activity related to export licensure. He also alleged more generally "wrongful termination, discriminatory practices, breach of contract, breach of [the] implied covenant of good faith and fair dealing, fraud and breach of wage and hour laws." Amended complaints were filed in January and December 2010. Sunhillo filed answers and a cross-claim, which is not in the record. In March 2010, defense counsel sent Fulton a frivolous litigation letter, citing Rule 1:4-8 and demanding dismissal of his claims.

A period of substantial and highly-contested motion practice involving discovery ensued.[3] The case was eventually scheduled for trial on November 28, 2011. In September 2011, Sunhillo filed a motion for summary judgment. Fulton filed opposition and Sunhillo replied. During oral argument on October 21, the motion judge allowed Fulton to submit a late response to Sunhillo's statement of uncontested facts. Both parties filed additional briefs in response.

On November 14, the judge entered an order granting Sunhillo's motion and dismissing all of Fulton's claims. The order was accompanied by a detailed written opinion setting forth the judge's reasons.

Sunhillo voluntarily dismissed its counterclaim. It also filed a motion seeking counsel fees and costs on the grounds that the litigation was frivolous, pointing out that Fulton had filed similar litigation against two prior employers and that he engaged in frivolous discovery not relevant to his claims in the litigation. On December 16, the judge placed a brief oral decision on the record ...

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