Opinion
DOCKET NO. A-0207-13T3
08-11-2015
ROSETTA TECHNOLOGY GROUP, LLC, Plaintiff-Appellant, v. DSR MANAGEMENT, INC., Defendant-Respondent.
Jared Somer (Law Offices of Lloyd Somer), attorney for appellant. Thomas W. Sweet, attorney for respondent.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Lihotz and St. John. On appeal from Superior Court of New Jersey, Law Division, Hudson County, Docket No. L-3096-11. Jared Somer (Law Offices of Lloyd Somer), attorney for appellant. Thomas W. Sweet, attorney for respondent. PER CURIAM
Plaintiff Rosetta Technology Group, LLC, appeals from the quantum of damages awarded to it from defendant DSR Management, Inc., following a bench trial. The court found that DSR breached its contract with plaintiff, and, as a result, Rosetta was entitled to damages of $6,600. Rosetta contends the court erred in its award. Having reviewed the arguments advanced and in light of the record and governing law, we affirm.
I.
The record discloses the following facts and procedural history. Plaintiff entered into a consulting/employment agreement with DSR dated August 1, 2007 (the Agreement). Section 1.1 of the Agreement listed Forest Laboratories as a Rosetta client and provided Forest "will not be solicited by DSR Management, Inc. (and/or any of its employees or holdings) for the period of two (2) years after Rosetta has completed its relationship with Forest Laboratories." The Agreement prohibited DSR's employees from working at or soliciting work from Forest, placing any consultants or employees with Forest, and providing any data process and/or system programming services for Forest, except as provided by the Agreement.
Rosetta asserted that the restrictive covenant in the Agreement provided that neither defendant nor its personnel work directly for Forest. At the conclusion of the bench trial, the court found that Section 1.1(a) of the Agreement was "clear and specified that employees (i.e., DSR) shall not 'work at' or 'solicit work' from any of RTG's clients." DSR is not appealing the finding of the trial court that it breached the contract.
Rosetta contended that an employee of defendant worked directly for Forest and that DSR billed Forest directly for the work undertaken by that employee, which violated the Agreement. Rosetta claims that defendant billed Forest, exclusive of expenses, $65,913.09 for the employee's services. Rosetta asserted that had it undertaken the work at Forest, it would have generated a total profit of $36,000.
Rosetta also argued that Section 4 of the Agreement required, in the event of a breach of Section 1.1 by DSR, it was obligated to pay as damages "all compensation, profits, monies, accruals, increments, and other benefits" received by DSR. Plaintiff contends that the measure of damages should be computed based on that standard.
In its written decision, the court determined that lost profits should be awarded to Rosetta, but that it must prove: the amount of damages with a reasonable degree of certainty; the wrongful acts of the defendant caused the loss of profit; and the profits were reasonably within the contemplation of the parties at the time the contract was entered into. Rosetta contended that the measure of damages should be the gross revenues received by DSR from Forest, net of its expenses, which equated to $65,913.09. The judge found that the "amount sought in the complaint is both unreasonable and speculative." In arriving at damages based on the evidence, the court held,
In determining the actual damages suffered by the plaintiff, the court has considered the net profits which plaintiff did not receive as a result of defendant's actions. Thus, based on the testimony given at trial, the court finds that the net profit that defendant realized as a result of placing [employee] at Forest, was $6,6 00 according to the testimony of [an employee] Rahul Shah.The court then entered a judgment on June 18, 2013, awarding damages to plaintiff in the amount of $6,600, together with costs. It is from that judgment that plaintiff appeals.
On appeal, Rosetta argues that Section 4 of the Agreement provides "that damages include not just profit but all revenue that was created during the breach of contract." Section 4 of the Agreement does not refer to Section 1.1(a), but does refer to Sections 4(b), and 4(c). However, no such sections are contained in the Agreement. Rosetta further argues, notwithstanding the Agreement, damages should be measured by DSR's revenues or by the net profit it would have received. Finally, Rosetta contends the judge erred in computing DSR's net profit, arguing certain deductions should not have been allowed.
II.
We review the trial court's determinations, premised on the testimony of witnesses and written evidence at a bench trial, in accordance with a deferential standard.
Final determinations made by the trial court sitting in a non-jury case are subject to a limited and well-established scope of review: "we do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice[.]"
[Seidman v. Clifton Sav. Bank, S.L.A., 205 N.J. 150, 169 (2011) (alteration in original) (quoting In re Trust Created by Agreement Dated Dec. 20, 1961, ex rel. Johnson, 194 N.J. 276, 284 (2008)).]
However, it is well-established that our review of a judge's conclusions of law is de novo. Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140 N.J. 366, 378 (1995) ("A trial court's interpretation of the law and the legal consequences that flow from established facts are not entitled to any special deference.").
We first note non-competition covenants, while enforceable, are scrutinized closely because they operate in derogation of free competition and the individual's right to exploit his skills and labor. A non-compete provision is not valid if its only purpose is to restrict competition, but it may be valid to the extent it furthers some other legitimate goal of the employer. See Solari Indus., Inc. v. Malady, 55 N.J. 571, 576 (1970); Whitmyer Bros. v. Doyle, 58 N.J. 25, 36 (1971).
Under the approach of the Solari/Whitmyer line of cases, a non-compete "is enforceable to the extent that it is reasonable under all of the circumstances of the case." Karlin v. Weinberg, 77 N.J. 408, 417 (1978). A non-compete will be found reasonable if it "(1) protects the legitimate interests of the employer, (2) imposes no undue hardship on the employee, and (3) is not injurious to the public." Ibid. (numbering added; internal quotations and citations omitted); see also The Cmty. Hosp. Grp., Inc. v. More, 183 N.J. 36, 45-46 (2005).
Courts considering non-compete covenants "'recognize as legitimate the employer's interest in protecting trade secrets, confidential information, and customer relations.'" Campbell Soup Co. v. Desatnick, 58 F. Supp. 2d 477, 489 (D.N.J. 1999) (quoting Ingersoll-Rand Co. v. Ciavatta, 110 N.J. 609, 628 (1988)).
Here, the issue is the computation of damages for breach of the non-compete clause. In Totaro, Duffy, Cannova & Co., L.L.C. v. Lane, Middleton & Co., L.L.C., 191 N.J. 1 (2007), the Court set forth the principles that inform any award of contract damages. As a threshold matter, it explains that "judicial remedies upon breach of contract fall into three general categories: restitution, compensatory damages and performance." Id. at 12, (citation and internal quotation marks omitted). The Court noted that
[e]ach of these contract remedies serves a different purpose. Restitution returns the innocent party to the condition he or she occupied before the contract was executed. Compensatory damages put the innocent party into the position he or she would have achieved had the contract been completed. Performance makes the non-breaching party whole by requiring the breaching party to fulfill his or her obligation under the agreement.The Court further observed that, "[m]ost often, courts award compensatory damages in a breach of contract action" and that "[t]he extent of a damage award, and its connection to the breach, has its origins in English Common Law, arising from the seminal decision in Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854)." Id. at 13 (citations omitted).
[Id. at 12-13 (citation omitted).]
Here, basic principles of contract law control. First, "'[u]nder contract law, a party who breaches a contract is liable for all of the natural and probable consequences of the breach of that contract.'" Ibid. (quoting Pickett v. Lloyd's, 131 N.J. 457, 474 (1993)). Second, "the goal is 'to put the injured party in as good a position as if performance had been rendered.'" Ibid. (editing marks omitted) (quoting Donovan v. Bachstadt, 191 N.J. 434, 444 (1982)). Third, "in order to be compensable, 'the loss must be a reasonably certain consequence of the breach, the exact amount of the loss need not be certain.'" Id. at 14 (editing marks omitted) (quoting Donovan, supra, 91 N.J. at 445). Fourth, "mere uncertainty as to the quantum of damages is an insufficient basis on which to deny the non-breaching party relief." Ibid. Finally, "'[p]roof of damages need not be done with exactitude.'" Ibid. (alteration in original) (quoting Lane v. Oil Delivery Inc., 216 N.J. Super. 413, 420 (App. Div. 1987)). Those damages may include lost profits, so far as they can be determined with a "reasonable degree of certainty." Stanley Co. of Am. v. Hercules Powder Co., 16 N.J. 295, 314 (1954).
In reaching its decision, the trial court "considered the net profits which plaintiff did not receive as a result of defendant's actions." We agree with the judge that gross revenues were not the proper measure of damages and Section 4 of the Agreement did not control. In arriving at the quantum of damages, the court awarded compensatory damages to plaintiff as evidenced by its factual finding of the net profits that plaintiff would have received. We conclude that the court applied the proper legal standard by determining net profits as the compensatory damages. As to the court's factual findings of the amount of the compensatory damages, there is sufficient credible evidence in the record to support its finding.
"Final determinations made by the trial court sitting in a non-jury case are subject to a limited and well-established scope of review." D'Agostino v. Maldonado, 216 N.J. 168, 182 (2013) (citation and internal quotation marks omitted). "[W]e do not disturb the factual findings and legal conclusions of the trial judge unless we are convinced that they are so manifestly unsupported by or inconsistent with the competent, relevant and reasonably credible evidence as to offend the interests of justice[.]" Ibid. (internal quotation marks omitted). We see no basis to disturb the result here.
Affirmed. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION