Opinion
DOCKET NO. A-0646-11T4
05-13-2013
SUN PHARMACEUTICAL INDUSTRIES, INC., Plaintiff-Appellant, v. CORE TECH SOLUTIONS, INC.; KIRTI VALIA; KEVIN HAHNEN; and THE HAHNEN GROUP, LLC, Defendants-Respondents.
Jeffrey A. Cohen argued the cause for appellant (Flaster/Greenberg P.C., attorneys; Mr. Cohen and Adam E. Gersh, on the briefs). A. Richard Feldman argued the cause for respondents (Bazelon Less & Feldman, P.C., and Larry Spector (Larry Spector P.C.) of the Pennsylvania bar, admitted pro hac vice, attorneys; Mr. Feldman, Christina M. Reger, and Mr. Spector, on the brief).
RECORD IMPOUNDED
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Fisher, Alvarez and Waugh.
On appeal from the Superior Court of New Jersey, Chancery Division, General Equity Part, Mercer County, Docket No. C-54-09.
Jeffrey A. Cohen argued the cause for appellant (Flaster/Greenberg P.C., attorneys; Mr. Cohen and Adam E. Gersh, on the briefs).
A. Richard Feldman argued the cause for respondents (Bazelon Less & Feldman, P.C., and Larry Spector (Larry Spector P.C.) of the Pennsylvania bar, admitted pro hac vice, attorneys; Mr. Feldman, Christina M. Reger, and Mr. Spector, on the brief). PER CURIAM
Plaintiff Sun Pharmaceutical Industries, Inc., appeals the dismissal of its Chancery Division multi-count amended complaint against defendants Core Tech Solutions, Inc. (Core), Dr. Kirti Valia, Kevin Hahnen, and The Hahnen Group, LLC (Hahnen Group). Plaintiff alleged breach of contract, breach of a letter of intent (LOI), fraud, breach of the LOI's covenant of good faith and fair dealing, promissory estoppel, and unjust enrichment. Plaintiff sought preliminary and permanent injunctive relief as well as a jury trial on some issues.
On August 27, 2010, the trial judge dismissed the tortious interference claim filed against Hahnen and the Hahnen Group, and the conspiracy claim against all defendants. On February 15, 2011, the trial judge denied plaintiff's motion for reconsideration of an earlier decision striking plaintiff's demand for a jury trial and request to transfer the matter to the Law Division. On June 24, 2011, the trial judge granted summary judgment dismissing plaintiff's claims for breach of contract against Core, and fraud against all defendants. A subsequent motion for reconsideration was also denied.
At the close of the trial on the remaining counts of the complaint, Core filed a motion for involuntary dismissal pursuant to Rule 4:37-2(b). On August 22, 2011, the judge dismissed plaintiff's amended complaint. By order entered August 23, 2011, the judge dismissed with prejudice all remaining claims against Core. By final judgment issued September 29, 2011, all unresolved claims against all defendants were dismissed.
I
We glean the following from the extensive record. Valia is the president and chief executive officer of Core, a small, five-employee medical technology business that chiefly performs research and development for pharmaceutical companies. In January 2001, Core began to develop its own product: the Fentanyl Transdermal System (FTDS), a reservoir skin patch that administers the pain-killing drug Fentanyl.
In April 2002, Core entered into an agreement with Geneva Pharmaceuticals, Inc. (Geneva), pursuant to which Geneva provided approximately $1,300,000 to Core for product development, and for the purchase and outfitting of a manufacturing facility with equipment. By 2004, Core had opened the facility, but, according to Valia, was in dire financial difficulty and could not continue work on the FTDS without an immediate infusion of $500,000 from Geneva. Geneva responded by terminating the contract on August 13, 2004, based upon Core's "willful uncured breach," as well as Geneva's determination "that the market opportunity for the Product is no longer sufficiently attractive to support a launch or the continued development of the Product."
Geneva subsequently became Sandoz, Inc.
In November 2004, Valia met with Dilip Shanghvi, who was the managing director of plaintiff's parent company, Sun Pharmaceutical Industries, Ltd. (Sun India), to discuss the prospect of Sun India and Core going into business together to produce and market the FTDS. These discussions ended in 2005 without agreement.
In December 2005, Core entered into a contract with Teikoku Pharma U.S., Inc., which paid Core $1,000,000 toward the further development of the FTDS. Core's contract with Teikoku ended on March 3, 2006, when Teikoku decided that the FTDS did not comport with Teikoku's strategic direction or financial goals.
In May 2006, Core again had discussions with Sun India about the FTDS. The discussions ended in August 2006.
In November 2006, Core and the RxElite pharmaceutical firm entered into a contract requiring RxElite to pay Core $2,700,000 toward the further development of the FTDS. The contract terminated in January 2008, after new management at RxElite decided not make a payment that was then due Core.
In May 2008, Core and the K-V Pharma pharmaceutical firm executed an LOI concerning the marketing of the FTDS. Core terminated that relationship in September 2008 because of federal regulatory problems and other internal issues related to K-V Pharma.
In early 2009, Core and RxElite renewed their business relationship, executing a non-exclusive LOI obligating RxElite to broker a deal between Core and a third party for the commercialization of the FTDS. That LOI became effective on January 8, 2009, and was to terminate on February 8, 2009. However, the third party declined to enter into a contract and, by January 9, 2009, as a practical matter, no deal was possible.
Meanwhile, after Core and Sun India had broken off discussions in August 2006, Valia became friends with Jitendra Doshi, plaintiff's Executive Director, who had the authority to enter into contracts on plaintiff's behalf. In late 2008, Valia and Doshi began discussions about bringing Core's FTDS to market.
In January 2009, Valia met with Doshi and with Kirti Ganorkar of Sun India for further discussions, following which, on January 12, 2009, Core and plaintiff entered into a Mutual Confidentiality and Non-Disclosure Agreement as a prelude to contract negotiations. On January 31, 2009, Valia and Doshi executed an LOI on behalf of Core and plaintiff.
The LOI set out certain understandings between plaintiff and Core for the commercialization of Core's FTDS. The LOI provided that:
The following terms and conditions represent the Parties' present, non-binding intention and shall only be binding upon execution of a definitive Agreement between Sun Pharma and Core Tech. This document is only a list of proposed points that may or may not become part of an eventual Agreement. It is neither based on any agreement between the Parties; nor is it intended to impose any obligation whatsoever on any Party. The Parties do not intend to be bound by any agreement until each agrees to and signs a definitive Agreement and neither Party may reasonably rely on any promises inconsistent with this paragraph. This paragraph supersedes all other conflicting language in this instrument.
The LOI further provided that: (1) the parties would negotiate a definitive agreement within ninety days of the LOI's execution; (2) Core would not discuss the FTDS with any other business or person prior to the parties' execution of a definitive agreement; (3) plaintiff would pay Core the non-refundable sum of $150,000 upon execution of the LOI; (4) plaintiff would pay Core the non-refundable sums of $350,000 upon the parties' execution of a definitive agreement and $250,000 upon Core's successful completion of three product studies; (5) Core would conduct a pilot biostudy of the FTDS within ninety days of the LOI's execution; (6) plaintiff had the option of performing a confirmatory due diligence inspection within sixty days of the LOI's execution; (7) plaintiff was limited to certain territory within which it could market the FTDS; (8) Core would own the Abbreviated New Drug Application (ANDA) for the FTDS; (9) plaintiff would pay Core's costs to produce required process validation batches for ANDA approval of the FTDS; (10) plaintiff would purchase a certain number of FTDS patches from Core annually; (11) the parties would divide any profits according to a prescribed formula; (12) the LOI would self-terminate ninety days after its execution, if a definitive agreement could not be reached; (13) any extensions of the termination date had to be agreed upon by the parties in writing; and (14) the "Parties agree[d] to hereby discuss and negotiate in good faith to reach an Agreement" within ninety days of the LOI's execution.
Despite the declared non-binding nature of the LOI, the parties recognized that some of its provisions were necessarily binding. These included the LOI's termination date, plaintiff's exclusive right to negotiate with Core for a ninety-day period, plaintiff's payment of $150,000 to Core upon execution of the LOI, and the parties' obligation to bargain and negotiate in good faith. In fact, Valia testified that the LOI required that Core negotiate and bargain in good faith to reach a definitive agreement, and Core conceded that the LOI bound the parties to negotiate in good faith.
Valia testified that, after signing the LOI, he asked Doshi whether Core should prepare the first draft of the definitive agreement. According to Valia, Doshi replied that plaintiff would provide an initial draft within two weeks. In contrast, Doshi testified at his deposition that there was no understanding concerning who would prepare the first draft. In any event, the LOI's ninety-day negotiations period commenced on January 31, 2009, and expired at midnight on May 1, 2009.
Doshi died prior to trial.
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In conformance with the LOI, plaintiff gave Core $150,000 on February 2, 2009. That amount was intended to pay for the pilot biostudy called for by the LOI. On February 17, 2009, Core entered into a contract with an outside testing service for $122,660 to perform the study. Plaintiff also conducted its due-diligence inspection of Core's facility, as provided for in the LOI, on March 21 and 25, 2009, with Core's cooperation.
On April 7, 2009, Valia e-mailed Doshi, informing him that the results of the pilot biostudy would soon be available. Valia reminded Doshi that the LOI "allows 90 days to negotiate in good faith to execute the definitive Agreement between our two companies. This timeframe expires on May 1st, 2009. To start the process and satisfy this deadline, please provide the initial draft of the definitive Agreement for our review this week."
On April 10, 2009, Core received the favorable results of the outside testing service's pilot biostudy of the FTDS. That same day, Valia e-mailed the testing service's clinical study report to Doshi.
On April 11, 2009, Doshi e-mailed Valia plaintiff's first draft of the definitive agreement. Shortly thereafter, Valia forwarded it to Hahnen, Core's consultant and business advisor, directing Hahnen to spend all of his time preparing a response to plaintiff's first draft. Hahnen did so, working with Valia and spending thirty to forty hours over six or seven days reviewing and revising the draft to incorporate Core's concerns. In 2009, Core's website listed Hahnen as Core's vice president of business development.
On April 20, 2009, before Core issued its response to plaintiff's first draft, Doshi e-mailed Valia, stating that Core should ignore the first draft, which had been sent erroneously and inadvertently by plaintiff. Plaintiff did not explain the problem, but merely indicated that a revised draft would be sent to Core as soon as possible. Later that day, plaintiff sent a second draft to Core.
However, when Valia and Hahnen received notice that plaintiff was withdrawing the first draft, they began work on Core's own first draft of the definitive agreement, which Core submitted to plaintiff on the evening of April 21, 2009. Doshi immediately refused to utilize Core's draft document as a basis for negotiations, and insisted upon using plaintiff's second draft instead. Accordingly, Valia and Hahnen began their examination of plaintiff's second draft later that evening. That night, Hahnen sent Valia his revisions of plaintiff's second draft, along with an e-mail stating that "I hope this helps in the battle with the Evil Empire." Hahnen testified that he made this "Star Wars reference" because he viewed the situation as a "big guy squashing the little guy" and "[b]ecause of all the hoops that we were jumping through in order to keep this deal going."
On April 22, 2009, Valia e-mailed Doshi Core's proposed modifications of plaintiff's second draft. Doshi responded on April 27, 2009, enclosing plaintiff's revised, third draft of the agreement. In the e-mail, Doshi requested both an extension of the termination date of the LOI to May 17, 2009, and a personal meeting with Valia and Hahnen to discuss the document. Later that day, Doshi sent another e-mail to Valia, outlining nine more points to be discussed and negotiated by the parties.
On April 29, 2009, Valia e-mailed Doshi, objecting to certain modifications set out in plaintiff's third draft and to the nine other points raised by Doshi. He expressed particular concern about changes in the contemplated profit-sharing arrangement and the territorial reach of plaintiff's FTDS marketing effort.
Valia was especially troubled by plaintiff's unexplained substitution of a foreign corporation as the contracting party; plaintiff had been replaced by "Sun Pharma Global FZE Sharjah Corporation," an entity incorporated in the United Arab Emirates. He noted that Core's negotiating team was "frustrated by this last minute flurry of poorly planned activity when this process could have been started in February."
Valia refused plaintiff's request for an extension of the LOI's termination date, stating that, if the identity of the contracting parties was in question at this stage of negotiations, another two weeks would not be helpful. He also refused Doshi's request to meet with him and Hahnen in person, insisting that all further negotiations be in writing. In his e-mail, Valia stated that his attorney was reviewing plaintiff's third draft. This was not true, Core did not utilize the services of an attorney in the negotiations.
On the morning of April 30, 2009, Valia e-mailed Doshi, forwarding Core's revisions and responses to plaintiff's third draft. Doshi responded to Core's revisions by sending Valia plaintiff's final draft of the definitive agreement between plaintiff (not the foreign corporation) and Core on the afternoon of April 30, 2009. In the accompanying e-mail, Doshi wrote that, in plaintiff's view, the definitive agreement was ready for signing.
Thereafter, Valia, his wife, and Hahnen spent hours reviewing plaintiff's final draft, producing numerous points for discussion and further revision. At around 2:00 a.m. on May 1, 2009, Valia asked Hahnen to prepare "20 e-mails worth of Questions" that could be sent to plaintiff for its response. At 9:05 a.m., Hahnen sent Valia an e-mail that said "we have enough comments and questions to keep Sun hopping on this agreement. Great job on detailing our differences and providing ammunition." At 9:53 a.m., Hahnen sent another e-mail, setting out a list of questions and a proposed timetable for submitting them to plaintiff at prescribed intervals over the course of the last day of the LOI's ninety-day negotiations period.
Valia reviewed and revised Hahnen's suggested e-mails and then began sending them to plaintiff, one at a time, over many hours. During this period, Valia declined to answer Doshi's telephone calls. Hahnen prepared a chart that recorded the questions propounded to plaintiff and plaintiff's responses. The answers to certain questions of critical importance to Valia revealed that the parties were not in agreement.
At 10:37 p.m., Hahnen e-mailed Valia, in response to a question, adding that it was "[a]lmost the witching hour." At 12:19 a.m., on May 2, 2009, Hahnen sent another e-mail in response to one of Valia's e-mails, adding "[h]appy May 2nd! ! !"
On the afternoon of May 2, 2009, Valia sent a detailed e-mail and letter to Doshi, stating that the LOI had "self terminated," according to its terms, because the parties had failed to negotiate a definitive agreement despite their good faith efforts to do so. Additionally, Valia set out ten points of disagreement on key issues between Core and plaintiff.
Doshi wrote to Valia on May 8, 2009, stating that Valia's e-mail and letter terminating negotiations were unexpected and not in keeping with the spirit of good faith in moving the negotiating process forward. Doshi asserted that plaintiff and Core had agreed on all substantive issues and that only small points of disagreement remained. Accordingly, Doshi invited Valia to continue negotiations in an effort to arrive at a contract. Valia declined Doshi's invitation, and this litigation followed.
II
By way of appeal, plaintiff raises the following points of error:
I. The trial court's order granting Defendant Core Tech's motion for involuntary dismissal misapplied both the law and the facts and should be reversed.
A. Standard of review.II. The trial court's order depriving Sun of a jury trial drastically misapplied binding precedent and should be reversed.
B. The trial court erred because it used a definition of bad-faith conduct that is incongruent with binding New Jersey precedent to deny Sun relief.
C. The trial court erred because it refused to give sufficient weight to Sun's evidence of bad faith conduct.
D. The trial court erred because it improperly made credibility determinations and failed to consider the evidence in the light most favorable to Sun.
A. Standard of Review.III. The trial court abused its discretion when it limited Sun's presentation of evidence about Core Tech's past dealings.
B. The trial court erred in striking Sun's jury demand because Sun's legal claims were not ancillary to its equitable claims.
A. Standard of Review.IV. The trial court erred when it failed to recognize genuine issues of material fact
B. The trial court should not have barred Sun's presentation of evidence about Core Tech's past relationships.
and granted summary judgment on Sun's fraud claim.
A. Standard of review.V. The trial court erred when it prematurely dismissed Sun's claims for tortious interference and conspiracy.
B. Sun presented genuine issues of material fact that the trial court ignored when it dismissed Sun's fraud claims on summary judgment.
A. Standard of Review.VI. The trial court erred when it unjustifiably ruled Sun waived the sacrosanct attorney-client privilege.
B. The trial court erred by dismissing Sun's claims for tortious interference and conspiracy prematurely and on an incomplete record.
A. Standard of Review.VII. The trial court abused its discretion when it denied Sun discovery on issues of viability.
B. The trial court erred when it cursorily found Sun waived its attorney client privilege.
A. Standard of Review.
B. The trial court abused its discretion when it denied Sun the right to take discovery on issues of viability.
III
Plaintiff first contends the court erred in granting Core's motion for the involuntary dismissal of plaintiff's claim that Core breached its obligation to negotiate in good faith. Plaintiff argues that the judge applied the wrong law, failed to recognize instances of Core's bad faith, and relied on impermissible credibility determinations.
Rule 4:37-2(b) provides:
After having completed the presentation of the evidence on all matters other than the matter of damages (if that is an issue), the plaintiff shall so announce to the court, and thereupon the defendant, without waiving the right to offer evidence in the event the motion is not granted, may move for a dismissal of the action or of any claim on the ground that upon the facts and upon the law the plaintiff has shown no right to relief. Whether the action is tried with or without a jury, such motion shall be denied if the evidence, together with the legitimate inferences therefrom, could sustain a judgment in plaintiff's favor.We apply the same standard in reviewing those decisions. Monaco v. Hartz Mountain Corp., 178 N.J. 401, 413 (2004). "If, accepting as true all the evidence which supports the position of the party defending against the motion and according him [or her] the benefit of all inferences which could reasonably and legitimately be deduced therefrom reasonable minds could differ, the motion must be denied." Ibid. (internal quotation omitted).
The trial court reasoned that each of plaintiff's claims for breach of the LOI, promissory estoppel, unjust enrichment, and breach of the implied covenant of good faith and fair dealing, depended upon whether plaintiff could demonstrate that Core breached its obligation to negotiate in good faith. That determination had to be made in the context of the fact that plaintiff and Core had only executed an LOI, which set out certain terms and conditions that were to be the subject of future negotiations. It included a provision stating it represented the parties' "present non-binding intention" and that the parties would be bound only when they executed a definitive written agreement for plaintiff's distribution of Core's FTDS. Thus the LOI set out a framework for negotiations aimed at producing a contract.
Nonetheless, the trial court determined that certain provisions of the LOI were necessarily binding on the parties, constituting a contractual relationship. These binding provisions included the LOI's statement that the "Parties agree to hereby discuss and negotiate in good faith to reach an Agreement" within ninety days. Both plaintiff and Core concede that they were bound by that provision.
We do not agree with plaintiff's assertion that the trial court erroneously employed a definition of bad faith conduct drawn from federal law as opposed to state law. The court did rely upon a federal case in finding that an agreement to negotiate in good faith may constitute an enforceable contract, however, that case in turn relied upon New Jersey law. See Nevets C.M., Inc. v. Nissho Iwai Am. Corp., 726 F. Supp. 525, 531-33 (D.N.J. 1989) (finding that references to future negotiations in a document did not prevent it from being an enforceable contract), aff'd, 899 F.2d 1218 (3rd Cir. 1990).
Plaintiff's real dispute is with the court's formulation of the definition of good faith, in the context of an LOI, about which there is little New Jersey precedent. The court relied upon A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chem. Group, Inc., 873 F.2d 155 (7th Cir. 1989), a case involving an LOI committing the parties to negotiate in good faith. Id. at 156, 158. The opinion states:
The obligation to negotiate in good faith has been generally described as preventing one party from "renouncing the deal, abandoning the negotiations, or insisting on conditions that do not conform to the preliminary agreement." Teachers [Ins. and Annuity Ass'n. v. Tribune Co., 67 0 F. Supp. 491, 498 (S.D.N.Y. 1987)]. For instance, a party might breach its obligation to bargain in good faith by unreasonably insisting on a condition outside the scope of the parties' preliminary agreement, especially where such insistence is a thinly disguised pretext for scotching the deal because of an unfavorable change in market conditions. Id. at 506.The trial judge quoted the above passage in her decision, along with other material from the opinion, explaining that it informed her conclusions regarding the dispute.
[Apothekernes, supra, 873 F.2d at 158.]
Plaintiff argues that the court should have followed a supposedly wider definition of culpable conduct set out by the New Jersey Supreme Court in its explication of the implied covenant of good faith and fair dealing. In Brunswick Hills Racquet Club, Inc. v. Route 18 Shopping Center Associates, 182 N.J. 210, 225 (2005), the Court quoted Restatement (Second) of Contracts, § 205 comment d (1981): "As a general rule, '[s]ubterfuges and evasions' in the performance of a contract violate the covenant of good faith and fair dealing 'even though the actor believes his conduct to be justified.'" Plaintiff asserts the above passage stands for the proposition that, like the implied covenant, a contractual provision to negotiate in good faith may be breached by conduct consisting of subterfuges and evasions and that the trial court erred in focusing only on the type of conduct set out in Apothekernes.
Our Supreme Court, however, has recognized that "[g]ood faith is a concept that defies precise definition." Brunswick Hills, supra, 182 N.J. at 224. We therefore do not agree with plaintiff that the two cases are at odds. Culpable conduct as defined in Apothekernes is not significantly different than the "subterfuges and evasions" described in Brunswick Hills.
As Apothekernes states, the obligation to negotiate in good faith does not limit a party's "discretion to accept or reject the deal." Apothekernes, supra, 873 F.2d at 160. "Each case is fact-sensitive." Brunswick Hills, supra, 182 N.J. at 225. The rationale behind close scrutiny is that the Court was "not eager to impose a set of morals on the marketplace." Id. at 230.
In Brunswick Hills, a commercial tenant was lulled into a false sense of security that it had properly exercised an option for a ninety-nine-year lease nineteen months before the end of the lease term. Id. at 216-21. The landlord failed to notify the tenant that the exercise of the option required payment of $150,000, and did not respond to direct inquiries over many months. Ibid. That is a far cry from the scenario in this case.
In Brunswick Hills, the landlord's conduct resulted in a "windfall increase" in the rental amount at the end of the lease term at the tenant's literal expense. Id. at 231. The landlord achieved unjust enrichment by "lull[ing] plaintiff" through "a series of evasions and delays." Ibid. In contrast, the parties in this case never seemed to reach agreement on the most basic points regarding the ultimate contract. Neither side achieved any financial windfall at the expense of the other. These "experienced commercial parties," who only agreed to negotiate an agreement if mutually beneficial, can be safely left to "fend for themselves." See id. at 230. Hence the trial court did not err by relying upon Apothekernes, as it did not conflict with Brunswick Hills.
Plaintiff contends it demonstrated thirteen examples of bad faith that should have resulted in an award in its favor. This includes the judge's alleged failure to recognize and accord sufficient weight to Hahnen's e-mail comments to Valia, including his use of the language "evil empire," "keep Sun hopping," "ammunition," and "Happy May 2nd." The trial court acknowledged that Hahnen held negative views regarding plaintiff, but ultimately opined that the verbiage did not in and of itself establish bad faith. The court reasoned that the statements arose out of Hahnen's frustration at plaintiff's inexplicable withdrawal of the first draft, and equally unexplained rejection of the contract draft he and Valia prepared. We agree that Hahnen's comments do not establish Core's failure to negotiate in good faith.
Plaintiff also draws our attention to the fact that the judge did not consider consequential Core's misrepresentation about obtaining legal counsel to review the third draft of the agreement. Although the court did not explain its reason, neither does plaintiff explain how the falsehood violated Core's duty to bargain in good faith.
Plaintiff cites the nineteen e-mails sent by Core on the last day of negotiations as further support of its position. The trial court considered each in detail, however, concluding that they were not "concocted," sent in order to sabotage negotiations and foil any agreement, but rather, were Core's means of obtaining direct answers to important questions in the little time that remained before the negotiations period expired.
As the court stated in granting the Rule 4:37-2(b) motion for involuntary dismissal, the e-mails were not dispositive. When asked during trial if he had pulled the number of twenty e-mails out of the sky, Valia responded in the negative. When confronted with his deposition response that the number may indeed have come "from the sky," he categorically denied the implication that his choice was arbitrary. Valia later testified that he only sent out nineteen or twenty e-mails from the list of thirty-four points of disagreement with plaintiff's third draft because those were the most important to him.
Plaintiff cites to Core's identification of the contents of a proposed letter terminating negotiations on April 30, 2009, two days before the contract period expired, as another example of bad faith. But given that after the execution of the LOI on January 12, 2009, plaintiff did not provide a first draft of an agreement until April 11, 2009, refused to use Core's proposed contract, and made significant changes between documents without warning or explanation, Core's advanced drafting of the letter terminating negotiations was unsurprising. The end of the LOI's term was May 2, 2009, and no agreement had been reached by April 30, 2009. Hence the trial judge's conclusion that this was not an example of bad faith is unremarkable.
Nor did the trial judge consider Core's failure to explain the reasons plaintiff's responses to the e-mails were unsatisfactory to be symptomatic of bad faith. The parties had not been able to reach an agreement during the first eighty-eight days of the LOI. That Core did not do more than just acknowledge receipt of responses seems realistic in light of the negotiations to that point.
Plaintiff also asserts that Valia's refusal to meet with Doshi or answer his phone calls late in the negotiations established bad faith. As the trial court noted, however, Valia's customary negotiating style was to bargain only in writing in order to avoid misunderstandings.
Plaintiff next avers that Valia's failure to identify the shortcomings in the final draft, so that they could be cured, also established bad faith. The court observed, however, that plaintiff did not present evidence that Doshi ever conveyed to Valia the willingness to agree to anything Core might propose in order to enter into an agreement. Although Valia may not have highlighted deal breakers, neither did plaintiff. The obligation to negotiate in good faith does not include "reveal[ing] any and all information that might help the adversary . . . ." Brundage v. Estate of Carambio, 195 N.J. 575, 609 (2008).
Furthermore, plaintiff perceives Valia's failure to continue negotiations beyond the May 2, 2009 date to constitute a failure to negotiate in good faith. Because the LOI ended on May 1, 2009, however, Core had no obligation to continue negotiations at all.
The court considered all of the points raised by plaintiff, but differed as to their significance. We agree with the trial judge that none establish a breach of the obligation to negotiate in good faith.
Plaintiff also contends that the trial court improperly made and relied upon credibility determinations in dismissing its claims arising out of Core's alleged breach of its obligation to negotiate in good faith. As the rule states, a motion must be denied where "the evidence, together with the legitimate inferences therefrom, could sustain a judgment in plaintiff's favor." See R. 4:37-2(b). On this score, plaintiff points to nine such purported errors.
Plaintiff alleges that the trial court determined that Ganorkar was successfully impeached. Admittedly the trial court commented that Core successfully impeached his testimony about when plaintiff began to prepare a first draft of the final agreement, but the court noted it did not rely upon that conclusion in reaching its decision. Hence the point is not relevant to the court's decision on the Rule 4:37-2(b) motion.
Nor does our review of the record support plaintiff's contention that the trial judge agreed Hahnen was "justified" in his use of the terms "battle" with the "Evil Empire." The trial judge merely stated that Hahnen's comments were triggered by plaintiff's withdrawal of its first draft after the significant amount of time and effort Valia and Hahnen expended on it and were nothing more than an expression of frustration. In any event, since Hahnen was not a decisionmaker regarding the final agreement, the court did not view his language as proof of Core's breach of its obligation to negotiate in good faith.
Plaintiff next alleges the trial court made a credibility determination that Valia was acting in good faith when he raised concerns about plaintiff's third draft. But the court's finding was not that Valia acted in good faith, but that plaintiff failed to demonstrate that Valia acted in bad faith. Because plaintiff's third draft changed so many aspects of the second draft, and because the third draft did not track the negotiating points set out in the LOI, the court had objective measures available that did not require a credibility ruling.
Nor did the court find Valia was acting in bad faith when he refused to meet with Doshi late in the negotiations. Instead, the court was merely finding a negative — that Valia's refusal was not proof of Core's bad faith in negotiations but rather demonstrative of Valia's habitual negotiating style, relying upon writings to avoid misunderstandings.
Plaintiff returns to Valia's testimony that he "just pull[ed] a number from the sky" with regard to the e-mails sent to plaintiff the final day of negotiations in support of its position that the trial court relied upon improper credibility determinations. In depositions and during the course of the trial, Valia said he actually had thirty-four questions of varying importance which he narrowed down to twenty. Plaintiff offers no fact which casts doubt on that explanation, the only one available. Other than finding that plaintiff had not presented sufficient evidence to establish that the e-mails were pretextual and unrelated to any legitimate business concern, nowhere did the court make an affirmative credibility finding with regard to Valia's testimony.
Plaintiff further contends that the trial court made a credibility determination in interpreting a provision in plaintiff's final draft to permit plaintiff to default on contract payment terms, delaying such payment indefinitely while only incurring a small interest penalty, thus potentially making Core an unwilling creditor. The trial court, upon reviewing plaintiff's final draft, agreed that the wording supported Core's concerns expressed during negotiations about payment terms. Ganorkar testified to the contrary, but Ganorkar was not involved in the negotiations with Core. Thus the court's interpretation of the language was not based on any determinations regarding Ganorkar's credibility.
Plaintiff finally asserts that in observing that Core had reason to be suspicious of plaintiff, the trial court made a credibility finding. But no explanation for the argument is given other than a record reference to the comment. The statement went to plaintiff's deletion of a provision in the final draft, present in earlier drafts, prohibiting plaintiff from filing a competing ANDA during the term of any agreement. When Valia questioned Doshi about the deletion, Doshi offered no explanation. The court's comment does not address credibility, only plaintiff's unexplained and important revision.
The court did not violate Rule 4:37-2(b). Legitimate inferences that could be drawn in plaintiff's favor simply did not sustain a judgment that Core breached its obligation to negotiate in good faith.
IV.
Plaintiff's second point is that the trial court erred by striking its demand for a jury trial and refusing to transfer the matter to the Law Division. In granting defendants' motion to strike and denying plaintiff's motion to transfer, the trial court determined that plaintiff's legal claims were ancillary to its equitable claims and that the interests of judicial economy required the Chancery Division to decide the matter.
Absent an abuse of discretion, we do not disturb a Chancery Division decision regarding transfers to the Law Division for a jury trial. Steiner v. Stein, 2 N.J. 367, 377 (1949); Ward v. Merrimack Mut. Fire Ins. Co., 312 N.J. Super. 162, 169 (App. Div. 1998) ("The determination of what other causes of action will invoke the right to trial by jury or, alternatively, may require the judge to sit in equity, are issues best left to the sound discretion of the trial judge as those issues arise.").
The court based its determination upon the doctrine of ancillary jurisdiction. It is the "settled rule that where equity has rightfully assumed jurisdiction over a cause for any purpose, it may ordinarily retain the cause for all purposes, and proceed to a final determination of the entire controversy, and establish purely legal rights and grant legal remedies." Mantell v. Int'l Plastic Harmonica Corp., 141 N.J. Eq. 379, 393 (E. & A. 1947). Stated somewhat differently, the doctrine provides that, "where an action is brought which in the first instance is cognizable in the Chancery Division, it should be retained in that division irrespective of the fact that before or during the trial the equitable phases of the cause have been fully disposed of, leaving only purely legal issues remaining for determination." Steiner, supra, 2 N.J. at 378.
The policy behind the doctrine is to avoid multiplicity of suits, and that "jurisdiction of the whole controversy may be assumed for the doing of complete justice in the one suit." Fleischer v. James Drug Stores, Inc., 1 N.J. 138, 150 (1948); see also Mantell, supra, 141 N.J. Eq. at 393. The goal is to avoid the unnecessary fragmentation of litigation. Lyn-Anna Props., Ltd. v. Harborview Dev. Corp., 145 N.J. 313, 329 (1996).
While it is clearly the prerogative of a chancery judge to transfer matters to the Law Division when legal claims remain, "once there has been a final resolution of the equitable claims," such a transfer is neither necessary nor required if "the Chancery judge has invested a substantial amount of time in a case." Marioni v. 94 Broadway, Inc., 374 N.J. Super. 588, 617 (App. Div.) (footnotes omitted), certif. denied, 183 N.J. 591 (2005).
If the trial judge sitting in one division does not hear the entire case "once [having] assumed jurisdiction, all of the confusion and waste of judicial effort which the framers [of New Jersey's Constitution] sought to eliminate would reappear." Steiner, supra, 2 N.J. at 377. Therefore, once jurisdiction has been established in equity, the constitutional right to trial by jury is subject and subordinate to the Chancery Division's "general jurisdiction to adjudicate ancillary and incidental matters." Lyn-Anna Props., supra, 145 N.J. at 322 (quoting Fleischer, supra, 1 N.J. at 150). A court of equity may properly adjudicate ancillary legal claims "without providing the complainant with a jury trial." Id. at 321.
A legal claim or issue is ancillary to companion equitable claims and issues if it is "germane to or grow[s] out of the subject matter of the equitable jurisdiction." Fleischer, supra, 1 N.J. at 150. That is, a legal claim or issue is ancillary if it is "incidental" or "essential" to the underlying equitable claims or issues. Lyn-Anna Props., supra, 145 N.J. at 330; Ward, supra, 312 N.J. Super. at 166.
The Chancery Division may not, however, "retain jurisdiction over legal issues that are neither incidental nor essential to the predominant equitable remedy being sought. In such cases, the legal claims should be severed and transferred to the Law Division so that the parties may have the benefit of a jury trial as to those issues." Ward, supra, 312 N.J. Super. at 166.
Here, plaintiff filed its complaint in the Chancery Division, and the relief it sought was primarily equitable. Plaintiff asserted equitable claims, along with the legal claims for fraud and failure to bargain in good faith, requesting both temporary and permanent injunctive relief. Even in its amended complaint, in which it added tort claims against Hahnen, plaintiff continued to seek injunctive relief.
Plaintiff distinguishes between its equitable and legal claims on the basis that the equitable claims focused on the enforcement of the LOI, while the legal claims addressed Core's alleged fraud in misrepresenting its intent to reach an agreement and alleged failure to bargain in good faith. Plaintiff, working from that premise, thus casts its legal claims as independent of and alternative to its equitable claims, arguing that its legal claims did not grow out of the subject matter of the equitable jurisdiction. The trial court disagreed, citing to Fleischer and finding that plaintiff's legal claims were ancillary because they were germane to and grew out of the same subject matter as its equitable claims.
Clearly, plaintiff's fraud and tort claims arose out of the same facts and circumstances as did its equitable claims for unjust enrichment, promissory estoppel, and specific performance. The alleged misconduct of Core and Hahnen is the same alleged misconduct that undergirds plaintiff's equitable claims. Therefore, the trial court correctly concluded plaintiff's legal claims were ancillary to its equitable claims, as they were "germane to or gr[e]w out of the subject-matter of the equitable jurisdiction." Fleischer, supra, 1 N.J. at 150.
The alternatively pled tort claims in this case are also ancillary to equitable claims. The key is that the facts pertaining to all the legal issues were so "closely intertwined" with those pertaining to the equitable issues as to be almost indistinguishable. See Eckerd Drugs of N.J., Inc. v. S.R. 215, Rite-Aid Corp., 170 N.J. Super. 37, 42-43 (Ch. Div. 1979).
Therefore there was no impropriety in the court's reasoning that a transfer to the Law Division would not advance judicial economy. The court had invested a significant amount of time over a two-year period reviewing many documents, overseeing discovery, and addressing numerous motions. In order to avoid unnecessary duplication of effort with the Law Division, the court elected to retain jurisdiction.
This merely advanced the policies underlying the doctrine of ancillary jurisdiction, including avoidance of a multiplicity of lawsuits and fragmentation of litigation. See Lyn-Anna Props., supra, 145 N.J. at 329; Fleischer, supra, 1 N.J. at 150. The court had already "invested a substantial amount of time" in the case. See Marioni, supra, 374 N.J. Super. at 617. The court did not abuse its discretion by deciding that plaintiff's legal claims were ancillary to its equitable claims, and denying the transfer of the matter to the Law Division.
V
In its third point, plaintiff attacks the court's exclusion of evidence regarding Core's past dealings with other businesses as error. "In reviewing a trial court's evidential ruling, an appellate court is limited to examining the decision for abuse of discretion." Hisenaj v. Kuehner, 194 N.J. 6, 12 (2008).
Prior to trial, the court addressed Core's motion in limine to exclude evidence of Core's past dealings concerning the commercialization of the FTDS. Plaintiff opposed the motion, contending the evidence demonstrated Core's pattern and practice of taking money from potential investors without actually generating a product and that such evidence would impeach Valia's credibility. The court reserved decision until the issue arose at trial. Ultimately, the court determined the evidence was not sufficiently reliable to establish a habit or practice concerning business negotiations within the meaning of the rule.
New Jersey Rule of Evidence 406 provides:
(a) Evidence, whether corroborated or not, of habit or routine practice is admissible to prove that on a specific occasion a person or organization acted in conformity with the habit or routine practice.The party offering such evidence must establish conduct that is so uniform that it amounts to a nearly automatic response to a specified situation. Verni v. Harry M. Stevens, Inc. of N.J., 387 N.J. Super. 160, 190-91 (App. Div. 2006), certif. denied, 189 N.J. 429 (2007). The decision to admit evidence pursuant to Rule 406 is discretionary and we do not disturb it on appeal absent an abuse of discretion. State v. Radziwil, 235 N.J. Super. 557, 566 (App. Div. 1989), aff'd o.b., 121 N.J. 527 (1990).
(b) Evidence of specific instances of conduct is admissible to prove habit or routine practice if evidence of a sufficient number of such instances is offered to support a finding of such habit or routine practice.
The court found these prior business contacts to be limited in number. Each potential arrangement ended for reasons unique and unrelated to the other or to the LOI with plaintiff. Core's business dealings with Geneva, Teikoku, and its first arrangement with RxElite involved executed contracts, not LOIs. The issue of bad or good faith in contract negotiations was simply absent as to these agreements.
Core's transactions with K-V Pharma and the second deal with RxElite both involved LOIs; however, the K-V Pharma deal ended because of federal regulatory concerns and internal problems regarding K-V Pharma. The RxElite transaction ended when an essential third party declined to participate. These situations were factually dissimilar, not admissible to establish habit and routine practice; therefore, the court did not abuse its discretion in excluding them.
Plaintiff also contends it was prejudiced by the trial court's decision refusing to admit Geneva's contract termination letter for the purpose of impeaching Valia's credibility. In 2004, Valia notified Geneva that Core could not continue its contractual work on the FTDS without an immediate infusion of $500,000 from Geneva. In response, on August 14, 2004, Geneva issued a letter terminating the contract for three reasons: (1) Core's "willful uncured breach" and anticipatory breach of the contract, (2) the souring marketplace for products like the FTDS, and (3) a contract provision that allowed Geneva to terminate at any time and for any reason.
On August 16, 2004, Core's counsel wrote to Geneva challenging Geneva's "willful uncured breach" reason for termination. Geneva responded with a letter on October 27, 2004, asserting that Core had committed such a breach. Core countered with a letter on November 2, 2004, further disputing the alleged breach.
Valia certified that "[o]n August 14, 2004, ninety days before Core Tech was to produce a clinical batch, Geneva/Sandoz exercised its contractual right to terminate the Definitive Agreement. It did so after deciding to become the authorized distributor of DURAGESIC (Fentanyl Transdermal System) as manufactured by Alza/Johnson and Johnson." Valia did not mention any of Geneva's three stated reasons for terminating the contract.
Plaintiff obtained the Geneva documents, but not the contract termination letter. Once plaintiff learned that Core's litigation counsel had previously represented the company in connection with the 2002 Core/Geneva contract, the relevant documents were requested. Among the documents provided were three post-termination letters between Core's counsel and Geneva discussing the termination letter.
When deposed, Valia testified that "[i]n the month of August 14th, 2004, they sent us a termination letter since they became authorized or signed an agreement with J & J to become an authorized distributor of Fentanyl transdermal patch[es]." Valia did not mention the three reasons set out by Geneva in the termination letter.
A little more than a week before trial, Core's counsel provided a copy of the termination letter to plaintiff, explaining that it had been found when storage boxes were again searched for documents. Plaintiff objected to the late provision of the letter as unfair. The trial court ruled that plaintiff would be permitted to question Valia at trial about inconsistencies between his certification, deposition testimony, and Geneva's letter. The court thus reasoned that plaintiff would not be prejudiced by the recently produced letter so long as it retained the opportunity to impeach Valia concerning the contract termination.
Plaintiff questioned Valia regarding Geneva's termination letter, asserting the letter impeached Valia's credibility because he gave different reasons for termination in both his certification and deposition testimony than did Geneva. Core objected that the letter was inadmissible hearsay because the court would have to accept its contents as true in order to permit its use to impeach Valia's credibility. Protracted argument followed.
The trial court ruled that the letter was irrelevant because plaintiff was precluded from presenting evidence about Core's prior business dealings as establishing habit or practice. Additionally, the court agreed that the letter could not be used for impeachment without its contents being found to be true.
The court also ruled the late receipt was not prejudicial as three post-termination letters between Core's counsel and Geneva had been provided to plaintiff, which thoroughly discussed the termination letter. The court therefore reasoned that plaintiff knew about the letter and its contents, and had ample opportunity to question Valia about it during his deposition.
We agree with the trial court's rulings. In order to utilize the termination letter for impeachment purposes, its contents would have to be accepted as true. The letter was not authenticated, nor did plaintiff make any inquiry of Geneva regarding it. It was a hearsay document not otherwise admissible.
Nor did the court err in not finding the late production to be prejudicial — plaintiff had three post-termination letters between counsel, was aware of the content of the termination letter prior to deposition, and could have questioned Valia about it. No abuse of discretion occurred in the exclusion of Core's past business dealings generally, and Geneva's termination letter specifically. See Lancos, supra, 400 N.J. Super. at 275. Exclusion of the evidence did not constitute a manifest denial of justice. See ibid.
VI
In its fourth point, plaintiff contends the court erred in granting Core's motion for summary judgment dismissing the claim for fraud. Under the appropriate standard of review, an appellate court will "review the trial court's grant of defendant's motion for summary judgment de novo, applying the same legal standard as the trial court under Rule 4:46-2(c)." Turner v. Wong, 363 N.J. Super. 186, 198-99 (App. Div. 2003). A "motion for summary judgment should be granted only when the moving party establishes the absence of any genuine issue as to a material fact." Id. at 199.
Thus, a court must "consider whether the competent evidential materials presented, when viewed in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issue in favor of the non-moving party." Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 (1995). According to Brill:
By its plain language, Rule 4:46-2 dictates that a court should deny a summary judgment motion only where the party opposing the motion has come forward with evidence that creates a "genuine issue as to any material fact challenged." That means a non-moving party cannot defeat a motion for summary judgment merely by pointing to any fact in dispute.
[Id. at 529.]
Plaintiff alleged in its amended complaint that defendants committed fraud by misrepresenting that Core would enter into a final agreement regarding the commercialization of its FTDS, even though defendants had no such intention. After the court's grant of defendants' summary judgment motion and dismissal of the fraud claim, the court later denied plaintiff's motion for reconsideration.
"[F]raud requires a demonstration of five elements: (1) a material representation by the defendant of a presently existing or past fact; (2) knowledge or belief by the defendant of its falsity; (3) an intent that the plaintiff rely upon it; (4) reasonable reliance by the plaintiff; and (5) resulting damage to the plaintiff." Weil v. Express Container Corp., 360 N.J. Super. 599, 612-13 (App. Div.), certif. denied, 177 N.J. 574 (2003). "[F]raud is never presumed, but must be established by clear and convincing evidence." Id. at 613.
In support of its argument that a factual question was presented as to the first element of fraud, plaintiff references the trial court's allegedly mistaken credibility determinations and refusal to utilize circumstantial evidence of events occurring after the LOI's execution. We note that the trial court's decision was grounded not only on plaintiff's inability to establish a material misrepresentation of a presently existing or past fact, the first element, but also the fourth element, reasonable reliance by plaintiff. The court noted that the LOI included the following: "Parties do not intend to be bound by any agreement until each agrees to and signs a definitive Agreement, and neither Party may reasonably rely on any promises inconsistent with this paragraph." As a result, the LOI expressed only the parties' non-binding intentions and not a firm commitment that they would ultimately enter into a contract.
The court thus reasoned that the fourth element of fraud was also missing, because plaintiff did not prove a reasonable reliance on representations not contained in the LOI. Plaintiff reiterates that the court made improper credibility determinations when it granted summary judgment. Again, we disagree.
Core and RxElite entered into a non-exclusive LOI to have RxElite broker a deal between Core and a third party to market the FTDS. That letter became effective on January 8, 2009, and was to expire on February 8, 2009. At trial, Hahnen testified, however, that the third party declined to enter into a contract and, by January 9, 2009, the day after its effective date, the letter was no longer viable. No deal was possible. Valia testified similarly at his deposition. Thereafter, on January 12, 2009, Core and plaintiff executed a confidentiality agreement, and on January 31, 2009, they executed the LOI, which became effective on that date.
Plaintiff asserts that the overlapping terms of the Core/RxElite LOI and the Core/Sun LOI prove that defendants had no intent to enter into a contract with plaintiff. So long as the Core/RxElite LOI was in effect, defendants were precluded from entering into the LOI with plaintiff, and did so for the improper purpose of obtaining $150,000.
The trial court rejected the argument, relying on Valia's testimony that the Core/RxElite LOI was not an impediment because it was no longer viable when plaintiff and Core entered into their LOI. This was not an improper credibility determination on the question of fraud.
Under Brill, plaintiff was required to produce some evidence concerning the continued viability of the Core/RxElite LOI in order to avoid summary judgment, and failed to do so. See Brill, supra, 142 N.J. at 529. The only evidence on the subject came from Valia and Hahnen. The court gave credence to the only evidence presented concerning the issue, a perhaps subtle but real difference from a credibility determination.
Plaintiff also contends that the trial court erred by not accepting Core's failed past dealings as proof that defendants never intended to enter into an agreement with plaintiff. The court rejected the contention because Core's past deals with four different entities, each of which did not successfully close for different reasons, did not show a pattern of bad faith or of "sham negotiations."
The evidence established that the deal with Teikoku and the first deal with RxElite ceased when those companies decided to end the relationships, while the second deal with RxElite ended when a necessary third party declined to participate. The deal with K-V Pharma ended because of federal regulatory concerns and internal problems at K-V Pharma. We see no basis to disagree with the court on this score either.
Furthermore, plaintiff asserted that Geneva terminated the contract because Core committed a willful breach while Valia asserted the termination resulted from Geneva's distribution of a rival product. Geneva gave another reason for termination: its business judgment that the market was no longer sufficiently attractive to support the launch of this FTDS. In light of the discrepancy in Geneva's stated reasons for termination, the court determined that evidence regarding the 2004 termination of the Geneva/Core contract did not logically support the claim that defendants made misrepresentations to plaintiff in their 2009 LOI.
To avoid summary judgment, plaintiff was required to provide clear and convincing evidence regarding Core's past transactions in order to connect them to the LOI. No such evidence was provided at all. The prior business dealings did not demonstrate that defendants did not intend to enter into a final agreement with plaintiff.
Lastly, plaintiff contends that the trial court erred by refusing to utilize circumstantial evidence of events occurring after the LOI's execution to show that defendants made misrepresentations. This includes Core's last-day submission of e-mails regarding the agreement and Hahnen's comments describing plaintiff as the "Evil Empire," and that the questions he composed for plaintiff would provide "ammunition" to Core.
The trial court did consider this evidence. Ultimately, however, the court found the evidence too insubstantial and speculative to demonstrate clearly and convincingly that defendants made misrepresentations in the LOI. This reasoning was sound because both Hahnen's disputed comments and Core's multiple e-mails responded to plaintiff's late submission of contract drafts. Hahnen's comments came after he worked on plaintiff's first draft of the agreement for over a week, only to have plaintiff withdraw the proposal without explanation. The multiple e-mails responded to plaintiff's submission of changed contract terms in the final draft of the agreement, which it submitted to Core late in the day before Core sent the e-mails. This evidence, as a result, simply does not prove the result plaintiff urges us to find.
In order to establish fraud, plaintiff was required to present clear and convincing evidence that defendant either materially misrepresented present or past facts in the LOI, or that it reasonably relied upon Core's representations. See Weil, supra, 360 N.J. Super. at 612-13. In our view, the trial court correctly determined that no such proof had been provided. No error was therefore committed in the grant of summary judgment dismissing plaintiff's claim for fraud. See Brill, supra, 142 N.J. at 539-40.
VII
In its fifth point, plaintiff asserts the trial court erred in dismissing its claims for tortious interference and conspiracy due to its failure to state a claim upon which relief could be granted. See R. 4:6-2(e). "In reviewing a complaint dismissed under Rule 4:6-2(e)[,] [an appellate court's] inquiry is limited to examining the legal sufficiency of the facts alleged on the face of the complaint." Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989). "[A] reviewing court 'searches the complaint in depth and with liberality to ascertain whether the fundament of a cause of action may be gleaned even from an obscure statement of claim, opportunity being given to amend if necessary.'" Ibid. (quoting Di Cristafaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957)). If such a search fails to reveal a cause of action upon which relief may be granted, the dismissal is affirmed, but should be "without prejudice to a plaintiff's filing of an amended complaint." Id. at 772.
Plaintiff alleged by way of amended complaint that the Hahnen Group and Hahnen tortiously interfered with its contractual relationship with Core, and that all defendants engaged in a conspiracy to commit a fraud, deprive plaintiff of contractual benefits, and commit wrongful acts. The trial court's dismissal was mainly based upon agency principles.
The trial court concluded that Hahnen and the Hahnen Group were Core's agents, which determination was supported by plaintiff's own complaint which averred that "Core . . . and its principal, Valia, engaged The Hahnen Group and its principal, Kevin Hahnen," who, "as part of their engagement, were to provide advisory, consultation and other services to Core . . . related to Core['s] negotiations with Sun."
Thus even in plaintiff's complaint, it acknowledged that Hahnen and his business were retained by Core, which directed and controlled its activities. Such direction and control is a hallmark of an agency relationship. Sears Mortg. Corp. v. Rose, 134 N.J. 326, 337 (1993) ("An agency relationship is created when one party consents to have another act on its behalf, with the principal controlling and directing the acts of the agent."). "Since Printing Mart, [supra, 116 N.J. at 761,] a clear-cut consensus has emerged that if an employee or agent is acting on behalf of his or her employer or principal, then no action for tortious interference will lie." DiMaria Constr., Inc. v. Interarch, 351 N.J. Super. 558, 568 (App. Div. 2001), aff'd, 172 N.J. 182 (2002). Because of the agency relationship, the trial court properly found that plaintiff failed to establish a viable tortious interference claim.
In its complaint, plaintiff also alleged that Hahnen and the Hahnen Group conspired to "defraud Sun, to deprive it of its contractual benefits, and to commit . . . wrongful conduct," based on defendants' actions on May 1 and 2, 2009, at the end of the negotiations. The alleged conspiratorial conduct involves the parties' unsuccessful negotiations and the purely economic relationship between Core and plaintiff.
A civil conspiracy is "a combination of two or more persons acting in concert to commit an unlawful act, or to commit a lawful act by unlawful means, the principal element of which is an agreement between the parties to inflict a wrong against or injury upon another, and an overt act that results in damage." Morgan v. Union Cnty. Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993) (quoting Rotermund v. U.S. Steel Corp., 474 F.2d 1139, 1145 (8th Cir. 1973)) (internal quotation marks omitted), certif. denied, 135 N.J. 468 (1994). Thus, a conspiracy requires a "plurality of actors, that is, two or more persons, and concerted action." Exxon Corp. v. Wagner, 154 N.J. Super. 538, 545 (App. Div. 1977).
However, "[t]here can be no such . . . conspiracy by a corporation . . . with its own officers, agents or employees, who are performing their usual job of formulating and carrying out its managerial policy." Ibid. "[A] corporation which acts through authorized agents and employees . . . cannot conspire with itself." Tynan v. Gen. Motors Corp., 248 N.J. Super. 654, 668 (App. Div.), certif. denied, 127 N.J. 548 (1991). Plaintiff's complaint alleged only that Valia, Hahnen, and the Hahnen Group acted on behalf of Core in conducting negotiations with plaintiff, hence they could not have been engaged in a conspiracy with Core against plaintiff.
All four cases that plaintiff asserts support its position are factually dissimilar. In Banco Popular North America v. Gandi, 184 N.J. 161, 177-78 (2005), and In re O'Brien, 423 B.R. 477, 500 (Bankr. D.N.J. 2010), lawyers were alleged to have engaged in civil conspiracies with their individual clients; they were not acting on behalf of a corporation as its employee or agent. In Reliance Insurance Co. v. Lott Group, Inc., 370 N.J. Super. 563, 569-72, 577-82 (App. Div.), certif. denied, 182 N.J. 149 (2004), a financial consultant was alleged to have engaged in a civil conspiracy with an individual client whose corporation was facing financial difficulty; the consultant was not an employee or agent of the corporation. And, in State, Department of Treasury v. Qwest Communications International, Inc., 387 N.J. Super. 469, 474-79, 486 (App. Div. 2006), an accounting firm was alleged to have engaged in a civil conspiracy with a corporation; there was no allegation that the firm acted as a corporate agent, but rather that it was an active and independent participant in a securities fraud scheme. In this case, Hahnen was not only a consultant, but was listed on Core's website as vice-president of business development.
VIII
In its sixth point, plaintiff contends that the trial court erred in finding that plaintiff had waived the attorney-client privilege, therefore allowing defendants to question Ganorkar about his communications with plaintiff's lawyers. This claim is so lacking in merit as to warrant little discussion in a written opinion. R. 2:11-3(e)(1)(E). We note that Ganorkar knew nothing about the e-mails and did not testify about them. Nor did Ganorkar acknowledge that it was plaintiff's "plan . . . to delay sending Core . . . the draft of the definitive agreement until late in the negotiating time frame so that Core . . . would be pressured . . . in the negotiations to agree to Sun's terms." Ultimately, Ganorkar had no information or knowledge regarding these e-mails. The court's decision regarding Ganorkar's testimony simply had no effect on its disposition of plaintiff's causes of action.
IX
Finally, plaintiff argues that the trial court abused its discretion by denying plaintiff discovery concerning the viability of Core's FTDS. Appellate courts will normally defer to the trial court's disposition of discovery matters unless the trial court has abused its discretion. Payton v. N.J. Tpk. Auth., 148 N.J. 524, 559 (1997). The court did not abuse its discretion. In fact, it granted a portion of plaintiff's discovery motion.
On October 13, 2010, plaintiff filed a motion to compel discovery, including a request for information concerning the viability of Core's FTDS product. By "viability," plaintiff meant that it wanted information concerning whether Core had the personnel, equipment, and wherewithal to manufacture millions of FTDS patches on a schedule tied to plaintiff's production requirements.
On December 6, 2010, the trial court ordered defendants to produce documents concerning Core's ability to manufacture its product in quantities sufficient to satisfy the potential market, but denied plaintiff's demand for Core's proprietary information or trade secrets concerning product formulation and patents.
During trial, plaintiff wanted to present expert proof that it suffered damages of up to $50,000,000 in lost profits, arguing that the FTDS product was commercially viable and would have yielded such profits. Plaintiff defined "viability" as the ability to sell the product for a certain amount. Plaintiff moved to preclude Core from presenting evidence that its product was not viable under this revised definition of that term.
The trial court tabled the matter until the liability portion of the trial was completed. Following the involuntary dismissal of plaintiff's action, the court dismissed the motion as moot. We see no abuse of discretion in this dismissal.
Affirmed.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APELATE DIVISION