Opinion
DOCKET No. BER-C-323-13
06-09-2014
FELIX E. FERRER Plaintiff, v. STAHLWERK ANNAHUTTE MAX AICHER GMBH & CO. KG, SAS STRESSTEEL INC., PETER MEYER, MATTHIAS SCHEIBE, and FLORIAN HUDE Defendants. v. FNA ASSOCIATES, INC., STRESSBAR SYSTEMS INTERNATIONAL, LLC, & KEVIN DOWLING Third-Party Defendants.
Michael J. Plata, Esq. and Michelle Ferrer, Esq. appearing on behalf of the plaintiff, Felix E. Ferrer (Plata Ferrer & Gutierrez LLC). Jeffrey J. Greenbaum, Esq. (Sills Cummis & Gross) appearing on behalf of the defendants, Stahlwerk Annahutte Max Aicher GmbH Co. KG, SAS Stressteel Inc., Peter Meyer, Matthias Scheibe and Florian Hude. Karol Corbin Walker, Esq., appearing on behalf of third-party defendants, FNA Associates, Inc. and Stressbar Systems International, LLC (LeClairRyan). Benjamin Curcio, Esq. appearing on behalf of third-party defendant, Kevin Dowling (Curcio Law Group).
NOT TO BE PUBLISHED WITHOUT
THE APPROVAL OF THE COMMITTEE ON OPINIONS
CIVIL ACTION
OPINION
Honorable Peter E. Doyne, A.J.S.C.
Michael J. Plata, Esq. and Michelle Ferrer, Esq. appearing on behalf of the plaintiff, Felix E. Ferrer (Plata Ferrer & Gutierrez LLC).
Jeffrey J. Greenbaum, Esq. (Sills Cummis & Gross) appearing on behalf of the defendants, Stahlwerk Annahutte Max Aicher GmbH Co. KG, SAS Stressteel Inc., Peter Meyer, Matthias Scheibe and Florian Hude.
Karol Corbin Walker, Esq., appearing on behalf of third-party defendants, FNA Associates, Inc. and Stressbar Systems International, LLC (LeClairRyan).
Benjamin Curcio, Esq. appearing on behalf of third-party defendant, Kevin Dowling (Curcio Law Group). Introduction
On May 7, 2014, Stahlwerk Annahutte Max Aicher GmbH & Company KG ("SAH"), SAS Stressteel ("SAS"), Peter Meyer ("Meyer"), Florian Hude ("Hude") and Matthias Scheibe (the "defendants" when referenced collectively) had filed a motion to reject claims of privilege regarding certain emails on SAS's servers and a motion to consolidate the current Bergen County Chancery Division action, BER-C-323-13 with the Essex County Law Division action captioned, Kevin J. Dowling v. SAS Stressteel, Inc., ESX-L-1722-14. Facts/Procedural History
On March 21, 2014 and May 9, 2014, this court authored lengthy opinions outlining the history of this matter. These previous opinions are incorporated herewith as if set forth at length. However, a brief summary of the relevant facts is provided.
SAH, a German corporation, is the leading manufacturer worldwide of special thread bars and steel accessories used in construction projects. SAH established SAS, a New Jersey corporation, to distribute these products throughout North, Central, and South America. However, SAH retained eighty-five (85) percent ownership of SAS.
Felix Ferrer ("Ferrer" or the "plaintiff") is a civil engineer with over thirty-five (35) years of experience in the construction industry. Ferrer had previously been employed with DYWIDAG-Systems International ("DSI") from 1970 until 2001. During this time, Ferrer established his own engineering consulting firm, FNA, Associates, Inc. ("FNA") where he designed support of excavation systems ("SOE") and acted as an SOE consultant.
In 2001, Ferrer was approached by a Georgia corporation, SAS Stressbar ("SAS Stressbar") which offered him a ten (10) percent interest in the company. A sales contract was executed and Ferrer was able to quickly secure two major orders from foundation contractors in New York City, purportedly due to his relationships and ownership of FNA. Thereafter, Ferrer agreed to partner with SAH and brought in his friend John Bowe ("Bowe") for a new business venture. They were unable to obtain the rights to continue using the name Stressbar; Ferrer created a new name, Stressteel. The new corporation, SAS Stressteel, was incorporated by Bowe on February 8, 2002.
In June 2002, Ferrer became president of SAS pursuant to an Employment Agreement ("Agreement"). The Agreement provided Ferrer 1) a ten (10) year contract; 2) a salary of not less than $150,000; 3) a ten (10) percent interest in SAS with the authority to purchase up to a twenty-five (25) percent interest; 4) benefits including vacation time and other perks. The Agreement required Ferrer to report to the Chief Executive Officer ("CEO") as determined by the Board of Directors (the "board"). Due to Ferrer's ownership of FNA, the Agreement expressly permitted for his continued relationship with FNA, a rebar detailing business, and any other related business enterprise so long as he would "devote such time, energy, and effort to the employer as is necessary to perform his obligations" pursuant to the Agreement. SAS contends Ferrer represented his association with FNA would be a "secondary activity" which he operated outside of normal working hours and would not interfere with his obligations to SAS.
The Agreement provided after termination of Ferrer's employment, he would not solicit customers of the employer which he was first introduced to by the employer or which he first met during the term of the Agreement for a period of three (3) years. The Agreement also stated no knowledge either party learned from the other would constitute confidential, trade secret, or proprietary information upon termination of the employment relationship. The Agreement did not contain a restrictive covenant.
After executing the Agreement, Ferrer hired his son, Daniel Ferrer ("Daniel"), to design the computer network for SAS. Daniel provided day to day management of the system, product support, and software quality assurance. Daniel certifies during his employment with SAS he had full control of the network and was never advised of any SAS policy regarding use of the network. Daniel also contends he was never asked to provide access to any individual for the purposes of monitoring SAS's employees' use of the network.
During Ferrer's employment, SAS was able to obtain approvals for the use of Grade 97 threaded bar reinforcement steel which was not then manufactured domestically. This allowed for slimmer walls as one SAS threaded bar provided the strength of five bars typically used. SAS was also the first company to develop 3 inch diameter grade 150 threaded bar anchors. SAS asserts their fabrication methods and the enhanced efficiencies of their products constitute trade secrets.
Ferrer contends SAH was aware of FNA as it was addressed in the Agreement and SAS consented to his continued activities outside of SAS. Ferrer asserts he used FNA to promote and showcase SAS products as FNA engineers created, evaluated, and optimized designs by recommending and utilizing SAS products. Ferrer alleges SAS products would not have otherwise sold due to their higher price point. Beginning in 2003, Ferrer housed FNA within SAS's new facilities in Fairfield, New Jersey allegedly visible to all employees and visitors. However, Ferrer contends FNA still purchased its own equipment and supplies and employees working for both companies received separate compensation. Ferrer also alleges he invented and eventually patented a prefabricated modular reinforcement cage system ("cage system") for the construction of concrete structures.
However, SAS asserts Ferrer misused SAS's employees, allowed FNA and other businesses to use SAS facilities without paying rent, used SAS money to pay personal expenses, and usurped opportunities by using FNA and not SAS to market Grade 97 Steel.
On January 24, 2004, pursuant to the Agreement, Ferrer exercised his option to purchase an additional five (5) percent interest in SAS, bringing his total interest in the company to fifteen (15) percent. Ferrer asserts between 2002 and 2013, he assisted SAS in achieving substantial growth as revenues rose from under $2 million to over $14 million due to his decisions to utilize FNA, gain approvals of Grade 97 steel, and create the cage system. The SAS work force grew from four (4) employees to over twenty-five (25) employees during Ferrer's employment. Ferrer contends he was responsible for the success of SAS as he accounted for nearly eighty (80) percent of SAS's major sales.
At meetings held in January 2007, the SAS Board decided to create a new company, Stressteel CA ("Stressteel CA"), headquartered in Fremont, California to provide for territories in the western United States and Canada.
Meyer and other SAS board members repeatedly inquired about the relationship between FNA and Ferrer due to the purported lack of transparency surrounding it. At the January 2008 board meeting, Meyer requested a letter from Ferrer describing the relationship between FNA and SAS. On June 1, 2008, Ferrer authored the response letter which essentially summarized the language of the Agreement. Meyer voiced his displeasure with this response at the June 10, 2008 board meeting. At board meetings held in early March 2009, Ferrer and SAS's CFO, Kevin Dowling ("Dowling"), indicated they would contact the owner of the Fairfield warehouse to see about expanding the facility to enhance the business profiles of both SAS and FNA.
In 2009, Ferrer contends he requested Gregory Moormann ("Moormann"), an SAS employee, work with Dowling to draft an employee handbook due to the substantial growth in personnel of the company. Moormann was employed with SAS from 2008 through 2012. Moormann is currently the Vice President of FNA. Ferrer asserts the draft was to include a policy for use of SAS's computer network and electronic communications. Ferrer alleges the initiative to draft these policies was solely his own; the board never required nor suggested policies involving the computer network be implemented. Moormann contacted SAS for a draft of its policies and to discuss ideas but was allegedly informed SAH does not set policies for its subsidiaries. A draft of the employee handbook was completed in May 2009 but was never finalized. Ferrer asserts there was never a policy regarding the use of the computer network during his employment at SAS. Ferrer also contends he utilized his SAS employee email account for his own personal affairs.
In 2009, SAH required SAS to borrow $300,000 purportedly to pay money owed to SAH. Although Ferrer contends he managed the day to day operations, SAH also imposed a $100,000 management fee on SAS. Ferrer also alleges SAH has failed to pay him approximately $172,653 in commissions earned or provide him any mandatory salary increases set forth in the Agreement since 2008. Ferrer further asserts his request to purchase an additional ten (10) percent of SAS, permissible pursuant to the Agreement, was denied and SAH has prevented SAS from issuing dividends.
On August 18, 2009, Moormann authored an email to jtsavaris@kenyon.com ("John"), FNA's patent attorney with a copy to Ferrer. The email discussed a patent application which Moormann and Ferrer were working on with the assistance of John (the "patent email").
During the October 10-12, 2011 board meetings, SAH made an offer to purchase a twenty-five (25) percent share of FNA which Ferrer was to consider. At the February 28, 2012 board meeting, the merger of FNA with SAS was discussed. Meyer asserted the combination was "critical" to the future of SAS and Ferrer was to prepare a proposal for the May 2012 meeting. Meyer contends part of the proposal would allow Ferrer to be a consultant to FNA and SAS in the future. Premised upon these discussions, Meyer asserts Ferrer's employment contract was extended until 2017.
On March 10, 2012, John Lombardi ("Lombardi"), an attorney, using email address jlombardi@ccjv.com, sent an email (the "Re-Tech email") to aaltlaw@aol.com ("Arthur") with copies to jpl@ccjv.com; pete@ccjv.com; nick@ccjv.com; felix@stressteel.com. The email requested that Arthur write up an operating agreement for Re-Tech Systems, LLC ("Re-Tech"). Lombardi suggested certain language which should be included in the agreement. The email also reflected FNA Associates, with Ferrer as the president, owned forty (40) percent of Re-Tech. Ferrer contends this email string is a correspondence between the business partners of Re-Tech and Re-Tech's attorney.
On October 9, 2012, Ferrer sent an email addressed to Peter Bray, Esq. ("Bray") on SAS's network from his email address, felix@stressteel.com. In the email, Ferrer sought advice from Bray about the merger of FNA and SAS (the "merger email"). The email was also copied to Harold Leib, Esq. ("Leib") at his email address, taxes73@aol.com. Ferrer contends Leib had been his long time personal attorney for over ten (10) years and Leib was also certified public accountant. Ferrer asserts Leib introduced him to Bray and he generally copied Leib on conversations with Bray to "have the benefit of both their counsel." (Ferrer Cert. ¶ 8). Furthermore, Leib represented Ferrer when his employment agreement was extended in February 2012. The following day, October 10, 2012, Bray authored a response to Ferrer, once again copying Leib, suggesting Ferrer not use company e-mail for future communications regarding this issue.
At the December 4-5, 2012 board meetings, discussions about the sale of FNA to SAS and the corresponding employment agreement for Ferrer were tabled until late December when Ferrer's counsel would be present. Meyer asserts it was unknown to the board members that Ferrer owned forty (40) percent of Re-tech, SAS's largest customer at the time. SAS contends while Ferrer appeared receptive to the merger, in December 2012, he allegedly conspired with Dowling to take SAS employees for FNA. At the December 29, 2012 meeting, Ferrer purportedly revealed: FNA's profits for the year were $1.2 million and profits for the prior three years were in excess of $2.2 million; SAS employees were working for FNA; FNA was using SAS facilities and resources; and FNA received benefits from SAS's business with Re-tech at a rate of $60-80/ton of steel. Meyer alleges he advised Ferrer he was no longer able to use SAS's staff and equipment for FNA purposes absent Meyer's consent. Ferrer alleges if FNA was not using SAS products in their designs, SAS products would rarely sell due to their higher prices caused by fluctuation in the value of the euro. Meyer also presented Ferrer with a proposed agreement allegedly offering SAH to purchase back Ferrer's fifteen (15) percent interest in SAS for $200,000, purchase ten (10) percent of FNA shares for $100,000, cancel the Agreement, and have SAS assume employment contracts for the employees who worked as project managers. In return, SAS would pay FNA $400,000 annually and commissions between one (1) and five (5) percent of SAS's gross profit. On or about December 30, 2012, Ferrer rejected this proposal. On December 31, 2012, Ferrer moved FNA out of SAS's facilities and SAS's entire engineering team allegedly resigned to join FNA.
In January 2013, Meyer asserts he was informed some of SAS's engineering professionals resigned their employment and went to work for FNA. On January 20, 2013, a meeting was held to discuss FNA and SAS. Following the meeting, Attorney Ferrer sent Max Aicher ("Aicher"), majority owner of SAH a draft of a proposed service agreement, a copy of the SAS and FNA budget prepared by Dowling, and a list of personnel expenses. Attorney Ferrer and Steffen Lutz, on behalf of SAS/SAH, corresponded throughout February and March 2013 concerning a prospective Memorandum of Understanding ("MOU") and/or Service Agreement between FNA and SAS. Ferrer asserts he consistently attempted to finalize the Service Agreement and was clear he did not wish to sell FNA. On July 31, 2013, Ferrer advised Meyer it continued not be in his best interest to sell FNA to SAS nor would FNA consider merging with any other company. Ferrer advised if no Service Agreement could be reached, FNA would cease work for SAS.
In the summer of 2013, Daniel contends SAH requested he provide their information technology personnel ("IT") with access to SAS's network. Daniel asserts SAH advised it needed access to establish a virtual private network ("VPN") between SAH and SAS. Daniel contends he was never contacted by SAS's IT prior to this request. Daniel alleges he had previously discussed creating a VPN between SAS and SAH with Ferrer and Dowling due to the efficiency it would provide in terms of communication. Daniel asserts he was advised once the VPN was established, he would continue to provide onsite maintenance for SAS's network.
On September 25, 2013, shareholder and board meetings were held. At the shareholders meeting, Meyer announced the appointment of a new director, Hude. Ferrer objected as he believed Hude had not acted in the best interest of SAS and the appointment was done solely to secure the assent of three (3) directors in the subsequent board meeting. No vote was taken on Hude's appointment but he was later added to the board pursuant to SAH's written consent utilizing its eighty-five (85) percent interest.
At the board meeting, Meyer announced the appointment of John Hritz, Esq. ("Hritz") as the new CEO of SAS. Ferrer objected to Hritz's appointment as Hritz would be located in New Jersey and would assume many of Ferrer's responsibilities.
A subsequent board meeting was held on October 22, 2013 at which time Meyer officially resigned as CEO and Hritz was appointed. At this meeting, the board proposed an executive board and new rules of procedure for SAS but discussion of these matters was tabled until the November meetings in Germany. Meyer also announced the appointment of Jaime Silva ("Silva") as SAS's COO. Silva was purportedly to be Ferrer's replacement as he would be responsible for the day to day operations of SAS. Ferrer objected as his contract did not expire until 2017 and he was not consulted regarding the decision. Ferrer asserts the appointment of Silva was a violation of the Agreement and the appointments of both Hritz and Silva constituted his constructive discharge. SAS asserts the Agreement never provided Ferrer any hiring or human resources responsibilities. A meeting was scheduled for October 21, 2013 to discuss the situation between FNA and SAS. FNA provided services to SAS through October 2013.
In the fall of 2013, SAH requested access to SAS's website account as part of a plan to gain operation of all the websites of the subsidiary companies. Daniel contends he maintained SAS's domain on his account but only served an advisory role for the website. Daniel alleges because he maintained several clients under one account, he was unable to provide access to SAH but instead had SAS's information transferred to an SAH account. In October 2013, the transfer of the website and the creation of the VPN were finalized. Daniel asserts at that time, SAH locked him out of SAS's network without notice.
On November 12, 2013, instead of flying to Germany for the scheduled board meetings, Attorney Ferrer notified SAS that Ferrer had terminated his employment, resigned his board seat, and had filed a lawsuit. Less than one week later, on November 20, 2014, SAS alleges Attorney Ferrer assisted Ferrer in founding a competing enterprise, Stressbar Systems International, LLC ("Stressbar"). Ferrer contends after his constructive discharge he obtained permission to utilize the Stressbar name. Stressbar has three (3) employees and is currently contracted to supply several major construction projects. Unlike SAS, Stressbar is a third-party vendor which places orders with competitors and then resells products to the end user. Pleadings
On November 12, 2013, Ferrer had a six-count verified complaint filed on his behalf in Bergen County, captioned Ferrer v. SAS Stressteel, BER-C-323-13, alleging oppression of a minority shareholder, breach of fiduciary duty, breach of the Agreement, breach of the covenant of good faith and fair dealing, violation of the New Jersey Wage Payment Law, and intentional wrongdoing (the "Bergen matter"). Defendants had an answer and a twelve-count counterclaim filed on December 27, 2013. Ferrer had an answer to the counterclaims filed on his behalf on January 28, 2014.
Thereafter, on March 7, 2014, defendants had filed a motion on short notice to amend their counterclaim and to file a third-party complaint joining additional parties and the plaintiff also had filed a motion on short notice to amend his verified complaint.
On March 13, 2014, Dowling had a four-count complaint filed on his behalf in Essex County, captioned Kevin J. Dowling v. SAS Stressteel, ESX-L-1722-14, against SAS, SAH, and Hritz alleging breach of contract, defamation, intentional infliction of emotional distress and common law wrongful termination (the "Essex matter").
On March 21, 2014, oral argument for the motions on short notice was entertained and the defendants were permitted amend their counterclaim to include the two additional claims and to add third-party defendants, FNA, Stressbar, and Dowling. Although Dowling submitted opposition, he lacked proper standing to oppose the motion. At oral argument, counsel for the defendants also advised the court of an electronic message in their possession between Ferrer, Bray, and an accountant which they believed was material to their order to show cause and needed to be disclosed pursuant to Stengart v. Loving Care Agency, Inc., 201 N.J. 300 (2010). The court accepted the notification but made no ruling. Counsel for the plaintiff advised the court they had not seen the email but Ferrer's personal counsel, Harry Leib, was also an accountant. The defendants' amended pleadings were filed on April 4, 2014. Ferrer was permitted to amend his complaint and had a verified amended complaint filed on April 8, 2014.
The defendants had an order to show cause seeking preliminary injunctive relief to prevent the misuse of trade secrets, propriety information and unlawful competition filed on April 4, 2014. The defendants later withdrew all claims except the request to enjoin Ferrer from doing business with customers he learned of while employed with SAS. Oral argument was entertained on May 7, 2014 and injunctive relief was denied pursuant to this court's decision dated May 9, 2014.
On May 7, 2014, the defendants had filed a motion to consolidate the Bergen and Essex matters in Bergen County. On May 15, 2014, counsel for Dowling submitted a cross-motion to dismiss and/or sever the third-party claims. The defendants had a reply submitted on May 19, 2014.
On May 7, 2014, the defendants also had submitted a motion to reject claims of privilege relating to three emails located on SAS's servers. Opposition was submitted on behalf of Ferrer on May 15, 2014. Opposition was also submitted on behalf of third-party defendants, FNA and Stressbar, on May 15, 2014. The defendants had a reply submitted on their behalf on May 19, 2014. Oral argument for both the motions was entertained May 30, 2014. Law
a. Privilege regarding email communication
"E-email exchanges are covered by the [attorney-client] privilege like any other form of communication." Stengart v. Loving Care Agency, Inc., 201 N.J. 300, 315 (2010). The Court in Stengart found cases outside of New Jersey were instructive in determining the reasonable expectation of privacy for an email communication from an employee to her attorney as no New Jersey decision provided direct guidance on the issue. The Bankruptcy Court for the Southern District of New York developed a four part test for determining an employee's reasonable expectation of privacy:
(1) does the corporation maintain a policy banning personal or other objectionable use, (2) does the company monitor the use of the employee's computer or e-mail, (3) do third parties have a right of access to the computer or emails 7, and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies?In Stengart, the court found the plaintiff had a reasonable expectation of privacy in emails she exchanged with her attorney on her employer's laptop because she took steps to shield her communications from her employer and her employer's policy did not address the use of a personal email account. Id. at 321-22. The determination whether an employee has a reasonable expectation of privacy is to be made on a case by case basis and no one factor is alone dispositive. Id. at 317-20 (internal citations omitted).
[Id. at 319 (citing In re Asia Global Crossing, Ltd., 322 B.R. 247, 257 (S.D.N.Y. 2005)].
b. Consolidation
R. 4:38-1 governs consolidation motions. Consolidation is appropriate "[w]hen actions involv[e] a common question of law or fact arising out of the same transaction or series of transactions." R. 4:38-1(a). Where the actions are pending in different vicinages "the order shall be made by the Assignment Judge of the county in which the venue is laid in the action first instituted on a party's motion, the judge's own initiative, or on certification of the matter to the judge by a judge of the Law or Chancery Division." Ibid. "The decision to consolidate actions lies within the discretion of the trial court." Union County Imp. Authority v. Artaki, LLC, 392 N.J. Super. 141, 149 (App. Div. 2007).
Under the doctrine of ancillary jurisdiction, once the chancery court assumes jurisdiction over a complaint seeking equitable relief, it has the ability to adjudicate all legal claims and award damages. Mantell v. International Plastic Harmonica Corp., 141 N.J. Eq. 379, 393 (E. & A. 1947). This is true whether damages are in addition to, or in lieu of, equitable relief. Id. at 393; see also, Buttinghausen v. Rappaport, 131 N.J. Eq. 252, 256 (Ch. Div. 1942).
The presence of legal issues in a primarily equitable case does not automatically give rise to a jury trial. Rather, any jury demand in the chancery division is subject to the chancery court's jurisdiction to adjudicate ancillary legal issues. Fleischer v. James Drug Stores, 1 N.J. 138, 150 (1948). The Chancery Division has ancillary jurisdiction over legal issues, to the extent that those issues are '"incidental or essential to the determination of some equitable question.'" Lyn-Anna Properties, Ltd. v. Harborview Development, 145 N.J. 313, 330 (1996). See also, Eckerd Drugs of New Jersey, Inc. v. S.R. 215, Rite-Aid Corp., 170 N.J. Super. 37, 43 (Ch. Div. 1979).
Legal issues are ancillary if they are "germane to or grow out of the subject matter of the equitable jurisdiction." Fleischer, supra, 1 N.J. at 150. Further, a germane counterclaim otherwise triable in the law division should clearly be retained by the chancery division. Leisure Technology v. Klingbeil, 137 N.J. Super. 353 (App. Div. 1975). Analysis
a. Motion to Reject Claims of Privilege
The interesting question presented and not answered herein is the determination of which party has to the burden of proof in a Stengart analysis. Suffice it to say, neither counsel briefed this issue and when asked at oral argument, each counsel asserted the opposing party had the burden. No determination is made with regard thereto. Considering the "facts" presented, there is sufficient evidence to demonstrate Ferrer and Moormann both had a reasonable expectation of privacy when using their SAS email addresses to send personal communications. This determination is an inherently fact sensitive inquiry. All three of the emails in question were directed to counsel apparently for the purpose of seeking legal advice. Ferrer certifies he used his work email for personal communications and he asserts SAS had no policy prohibiting such action. Furthermore, although a proposed employee handbook was drafted in 2009, it appears uncontested that SAS never enacted any policy regarding computer access or email accounts. Ferrer's son, Daniel, asserts he had control of the computer network and was never asked to provide access to any individual for the purposes of monitoring SAS's employees' use of the network. Therefore, Ferrer could have reasonably believed no one was or would be monitoring his email activity. Moormann also asserts he was unaware of any policy regarding emails and believed none of his emails were being monitored. Moormann worked with Dowling to create the draft employee handbook, so he was aware none of the proposed policies for use of the network were ever enacted. Moormann also alleges while working on the draft handbook, he was advised by SAH that no corporate policies regarding the use of the computer network existed and any such policies would have to be set by Ferrer and Dowling.
There was no request for a "Rule 104 hearing" before determining this issue, which is not to suggest movants' entitlement to the same at this time. The decision in Stengart does not reference a "Rule 104 Hearing". This court shall leave for another day the determination of whether, in a fact sensitive inquiry, a "Rule 104 Hearing" is appropriate.
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The defendants rely on Fazio v. Temporary Excellence, Inc., 2012 N.J. Super. Unpub. LEXIS 216 (App. Div. Feb. 2, 2012), which held there could be no reasonable expectation of privacy even without a computer policy if the employee used the employer's computer without password protecting those communications; however, unpublished decisions do not constitute precedent and should not be cited by any court. R. 1:36-3. Unlike Fazio, though, Ferrer not only knew there was no policy regarding use of electronic communications but also had knowledge about the computer systems as his son was responsible for the entire network at SAS. Ferrer and Moormann contend they were unaware of any monitoring by SAS or SAH of employees' computers or emails. Nor is there the suggestion of any monitoring activities apparently until after this litigation ensued. Daniel certified no one ever reviewed the contents of the network except to delete emails from terminated employees solely to preserve space. Premised upon the record, Ferrer and Moormann were not required to take any additional steps, such as utilizing password protection, to shield their emails from their employer to justify their reasonable expectation of privacy.
The defendants allege Ferrer could not have a reasonable expectation of privacy as he was advised by Bray in the merger email not to use to his work email for such communications. This argument would have been more successful prospectively; however, the merger email was the most recent of the communications at issue. Additionally, it does not logically follow that as Bray was concerned about the privacy of Ferrer's email communications then Ferrer also believed there was no reasonable expectation of privacy.
The defendants assert the inclusion of third parties on the merger and Re-Tech emails void any assertion of privilege. Regarding the merger email, Ferrer contends Leib was his personal counsel for over ten (10) years. Leib had provided legal counsel to Ferrer in the past; in 2012, he represented Ferrer as his attorney when Ferrer's employment agreement was extended. (See Plata Cert. Ex. C). Simply because Leib is both an attorney and an accountant does not make him a third-party in this instance. The "third-parties" on the Re-Tech email were principals of the corporation all of whom possessed an ownership interest. None of these assertions justify invalidating the attorney-client privilege.
The court in Stengart did not expressly adopt the Asia Global test; instead, the court required a case by case inquiry with no one factor alone being determinative. Id. at 320. In considering the four factors cited in Stengart: (1) SAS did not maintain any policy regarding use of the network; (2) none of the parties allege the company actual monitored SAS's employees' email communications; (3) third-parties did not have a right of access until the VPN was created, with the exception of Daniel; and (4) SAH and SAS never notified the employees nor were the employees aware of the use and monitoring policies as no such policies ever existed. See Stengart, supra, 201 N.J. at 319 (citing In re Asia Global Crossing, Ltd., 322 B.R. 247, 257 (S.D.N.Y. 2005). When examining the Asia Global factors in conjunction with the factual scenario, it is apparent a reasonable expectation of privacy existed. This court is disquieted by making fact sensitive determinations on a cold record, however, for purposes of this motion, Ferrer and Moormann both had a reasonable expectation of privacy that communications sent through their work email addresses would remain private and the claims of privilege shall stand.
b. Motion to Consolidate
The defendants assert consolidation is appropriate as both the Bergen and Essex matters involve common questions of law or fact arising out of the same transaction. The defendants allege the matters are related as Dowling connects his constructive discharge to his personal relationship with Ferrer. It is evident that both cases are intertwined, but not necessary comparable. The action brought by Dowling alleges breach of contract, defamation, intentional infliction of emotional distress and wrongful termination due to the defendants' alleged improper actions. Dowling's claims arise out of his own employment contract with SAS. The third-party complaint against Dowling alleges breach of fiduciary duty, conspiracy, conversion, misappropriation of trade secrets, breach of the duty of loyalty and aiding and abetting due to Dowling's alleged collusion with Ferrer. The defendants' contend their allegations constitute defenses to the claims raised in the Essex matter. Ferrer's verified amended complaint includes allegations of shareholder oppression, breach of fiduciary duty, breach of duty of loyalty, constructive discharge, breach of the covenant of good faith and fair dealing, violations of New Jersey Wage Payment Law, fraud and misrepresentation. There are parallels between the matters but that does not mean they are reciprocal cases, nor that consolidation is necessarily warranted.
"Equity has a general jurisdiction to adjudicate ancillary and incidental matters." Fleischer v. James Drug Stores, Inc., 1 N.J. 138, 150 (1948). "It suffices if the matters to be adjudicated be germane to or grow out of the subject-matter of the equitable jurisdiction." Id. Dowling's role as a third-party defendant does not, in and of itself, make his case ancillary. Dowling's action is primarily legal which entitles him to a jury trial; Ferrer seeks primarily equitable relief. At oral argument, counsel for the defendants contended Dowling's claims only needed to be ancillary to their counterclaims and not to the allegations of the plaintiff. Whether the third party claims could be considered ancillary to the plaintiff's claims thereby implicating the right to a jury trial is a determination left to another day. As consolidation pursuant to R. 4:38-1(a) is discretionary, this matter need not be addressed. See Union Cty. Imp. Auth. v. Artaki, LLC, 392 N.J. Super. 141, 149 (App. Div. 2007).
As there is overlap between the cases, Dowling may have relevant knowledge implicated in the Bergen matter. However, this justification alone is insufficient to compel consolidation. If the matters are not consolidated, Dowling will still be available to the defendants, causing them no prejudice. Any overlap between cases can be easily managed to prevent duplicative discovery or costs. Furthermore, although there are similar facts and circumstances between the cases, logistically, consolidation is inherently problematic.
Counsel for third-party defendant, Dowling, has demanded a jury trial and asserts the claims presently in the Law Division in the Essex matter do not belong in the Chancery Division. It is the general practice of the Chancery Division to not have jury trials. Dowling is entitled to a jury trial and consolidation would unduly complicate the matters. Dowling asserts consolidation should not be granted because it will cause unnecessary expense to Dowling who "does not have the resources to engage in voluminous discovery." However, no certification from Dowling is provided to attest to this point.
The Essex matter has been assigned to Track II with a discovery end date of March 10, 2015. A case management order was executed in the Bergen matter setting a discovery end date of August 15, 2014. Consolidating these matters would cause undue delay. The "rules are to be 'construed to secure a just determination, simplicity in procedure, fairness in administration and the elimination of unjustifiable expense and delay.' R.1:1-2. Our consolidation Rule, R.4:38-1(a), must be interpreted accordingly." Robert T. Winzinger, Inc. v. Brennan Bros., Inc., 191 N.J. Super. 114, 118 (Law Div. 1983). As consolidation is discretionary, it appears inappropriate as there are insufficient proofs to demonstrate the Essex matter is merely ancillary and consolidation would present logistical problems and cause unnecessary delay. Conclusion
This decision is premised solely upon the record presently before the court. The motion to reject claims of privilege regarding the three emails is denied as Ferrer and Moormann could have reasonably expected their emails would remain private. The defendants' motion to consolidate is also denied. The third-party complaint is dismissed without prejudice and without any R. 4:30A effect. Counsel for the defendants shall submit an order pursuant to the five day rule in conformity with this decision.