Opinion
DOCKET NO. A-3178-14T3
01-31-2017
NATIONAL AUTO DIVISION, LLC, Plaintiff-Appellant/Cross-Respondent, v. COLLECTOR'S ALLIANCE, INC., Defendant-Respondent/Cross-Appellant.
Galit Kierkut argued the cause for appellant/cross-respondent (Sills Cummis & Gross, P.C., attorneys; Ms. Kierkut, of counsel and on the brief; Grace A. Byrd, on the brief). Eric G. Fikry argued the cause for respondent/cross-appellant (Blank Rome, L.L.P., attorneys; Stephen D. Schrier and Mr. Fikry, of counsel; Mr. Fikry and Michael A. Iannucci, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R.1:36-3. Before Judges Yannotti, Fasciale, and Gilson. On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County, Docket No. C-59-14. Galit Kierkut argued the cause for appellant/cross-respondent (Sills Cummis & Gross, P.C., attorneys; Ms. Kierkut, of counsel and on the brief; Grace A. Byrd, on the brief). Eric G. Fikry argued the cause for respondent/cross-appellant (Blank Rome, L.L.P., attorneys; Stephen D. Schrier and Mr. Fikry, of counsel; Mr. Fikry and Michael A. Iannucci, on the brief). PER CURIAM
Plaintiff National Auto Division, LLC (NAD) appeals from an October 3, 2014 order dismissing with prejudice its amended complaint against defendant Collector's Alliance, Inc. (CAI) for failure to state claims on which relief can be granted under Rule 4:6-2(e). CAI cross-appeals from a February 3, 2015 order denying its motion for sanctions against NAD.
In its amended complaint, NAD alleged that CAI, a competitor, had improperly raided employees from NAD. Thus, NAD asserted claims for (1) tortious interference with prospective economic advantage; (2) tortious interference with contractual relations; (3) unfair competition; and (4) civil conspiracy. Applying the standard for dismissal under Rule 4:6-2(e), we reverse the dismissal of NAD's first three claims, but affirm the dismissal of the civil conspiracy claim. We also reverse the order denying CAI's motion for sanctions. Thus, the matter is remanded for further proceedings.
I.
We accept the facts as pled by NAD. See Nostrame v. Santiago, 213 N.J. 109, 127 (2013) (reiterating the well-established standard that on a motion to dismiss the facts alleged in the complaint must be accepted and accorded a liberal reading to ascertain if a cause of action is "'suggested by the facts'" (quoting Printing Mart-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 746 (1989))).
NAD sells extended automobile warranties via telemarketers. CAI sells collectible coins through several methods, including telemarketing. NAD claims that it competes with CAI because they both use telemarketers to sell products and services to customers. NAD further alleges that the methods of telemarketing are transferable.
NAD has approximately 100 employees and ten to fifteen of those employees are highly trained sales "closers." According to NAD, it meticulously trains its closers to fine tune "proprietary closing techniques" through the use of "proprietary scripts and confidential marketing and development data."
NAD asserts that CAI intentionally set about to raid a large number of employees from NAD and improperly lured those employees away. In that regard, NAD asserts that CAI developed an intentional "plan to harm NAD" and it paid a financial award to employees who successfully recruited NAD closers. Specifically, NAD contends that CAI targeted and raided over thirteen employees from NAD during a two-year period. NAD goes on to assert that CAI used "confidential information" to identify and contact its employees. Moreover, NAD contends that by hiring a large number of its closers, CAI obtained NAD's confidential methodologies for closing sales.
Further, NAD contends that at least six of its former employees who were hired by CAI had restrictive covenants and non-disclosure agreements. Thus, NAD alleges that CAI tortiously interfered with those contractual relationships by hiring those employees. The agreements were between the employees and Metro Marketing, LLC (Metro). NAD, however, claims that it is an affiliate of Metro and, therefore, covered under and protected by the restrictive covenant and non-disclosure agreements.
In addition, NAD alleges that at least one CAI employee denigrated NAD in a Facebook posting. That posting stated:
To [a]ll my [M]etro friends...good morning...As you are waking up dreading the shit hole they call [M]etro in which [you] must endure today...there is another way. The [d]ay I [l]eft Metro Marketing is the day I stopped feeling like a [l]oser.... Contact me for further instructions[.]NAD contends that this employee, and potentially others, posted additional public social media messages on behalf of CAI to disparage NAD and improperly solicit NAD employees.
Finally, NAD contends that CAI engaged in a conspiracy with its employees, who were formerly employed by NAD, to intentionally raid more employees away from NAD and to intentionally damage NAD's business.
In April 2014, NAD filed a complaint against CAI seeking relief based on CAI's alleged poaching, and asserting claims for tortious interference with contractual relations and unfair competition. CAI responded by writing to NAD and contending that the complaint's allegations were frivolous and violated N.J.S.A. 2A:15-59.1 and Rule 1:4-8. CAI also moved to dismiss the complaint.
NAD filed opposition to the motion to dismiss and filed an amended complaint. In its amended complaint, NAD asserted four causes of action: (1) tortious interference with prospective economic advantage; (2) tortious interference with contractual relations; (3) unfair competition; and (4) civil conspiracy. CAI then moved to dismiss the amended complaint and put NAD on notice that it would contend that the amended complaint was also frivolous.
The trial court heard oral arguments on the motion to dismiss and, on October 3, 2014, it entered an order granting CAI's motion and dismissed with prejudice all of NAD's claims. Thereafter, CAI filed a motion for sanctions, the motion was fully briefed, and the trial court heard oral arguments on January 23, 2015. On February 3, 2015, the trial court entered an order denying CAI's motion requesting sanctions.
NAD now appeals the order dismissing with prejudice all of its claims. CAI cross-appeals the order denying its motion for sanctions.
II.
We start with NAD's appeal. On its appeal, NAD argues that the trial court improperly made fact findings on a motion to dismiss, considered information outside the amended complaint, and failed to recognize that NAD had adequately plead facts supporting all four of its claims against CAI.
We use a de novo standard to review the dismissal of a complaint for failure to state a claim. Donato v. Moldow, 374 N.J. Super. 475, 483 (App. Div. 2005). In reviewing a dismissal under Rule 4:6-2(e), our inquiry is focused on examining the legal sufficiency of the facts alleged on the face of the complaint. Printing Mart, supra, 116 N.J. at 746. Thus, we must "search[] 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, [giving] opportunity . . . to amend if necessary." Ibid. (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super. 244, 252 (App. Div. 1957)).
"At [the] preliminary stage of the litigation, the [c]ourt is not concerned with the ability of plaintiffs to prove the allegation[s] contained in the complaint. For purposes of analysis plaintiffs are entitled to every
reasonable inference of fact. The examination of a complaint's allegations of fact required by the aforestated principles should be one that is at once painstaking and undertaken with a generous and hospitable approach."Using this standard, we review each of NAD's claims.
[Ibid. (citations omitted).]
A. Tortious Interference
NAD asserts two claims of tortious interference: (1) tortious interference with contracts; and (2) tortious interference with prospective economic advantage. The contracts NAD identifies are restrictive covenants and non-disclosure agreements that six of the employees signed with Metro. The prospective economic advantage NAD identifies was its interest in the continued employment of the employees who left and went to work for CAI.
The elements of tortious interference with an existing contract are:
One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.
[Nostrame, supra, 213 N.J. at 122 (quoting Restatement (Second) of Torts § 766 (1979)).]
The elements of tortious interference with prospective economic advantage are:
One who intentionally and improperly interferes with another's prospective contractual relation (except a contract to marry) is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation, whether the interference consists of
(a) inducing or otherwise causing a third person not to enter into or continue the prospective relation or
(b) preventing the other from acquiring or continuing the prospective relation.
See also Printing Mart, supra, 116 N.J. at 751-60 (explaining that to prevail on a claim for tortious interference with a prospective economic advantage, a plaintiff must show (1) the existence of a reasonable expectation of economic advantage; (2) an intentional and malicious interference with that expectation; (3) a causal connection between the interference and the loss of the prospective gain; and (4) damage).
[Ibid. (quoting Restatement (Second) of Torts § 766B (1979)).]
Although these torts are separate causes of action, both have as their focus the means of interference. Nostrame, supra, 213 N.J. at 121-22. To state a claim for either tort, the plaintiff must show that the interfering acts were intentional and improper. Ibid. (citing Restatement (Second) of Torts §§ 766 and 766B (1979)).
The mere inducement of an employee to move to a competitor is not, in and of itself, actionable when the employee is terminable at will. Avtec Indus., Inc. v. Sony Corp. of Am., 205 N.J. Super. 189, 194 (App. Div. 1985). Because NAD's employees were at-will employees, the alleged interference is governed by the tortious interference with a prospective economic relationship. Nostrame, supra, 213 N.J. at 121. Nevertheless, the inducement is actionable if the party offering the inducement either has an unlawful or improper purpose or uses unlawful or improper means. Avtec, supra, 205 N.J. Super. at 194. In Nostrame, our Supreme Court identified various types of conduct that has been deemed improper or wrongful. Nostrame, supra, 213 N.J. at 124. Improper and wrongful means includes conduct that amounts to fraud, defamation, deceit, misrepresentation, violence, intimidation, criminal or civil threats, or other violations of the law. Ibid.
1. Standing.
The trial court found that NAD lacked standing to bring a tortious interference with contracts claim related to the restrictive covenants and non-disclosure agreements. The court reasoned that the employees signed those contracts with Metro and NAD did not have standing to assert that claim on behalf of Metro. In opposition to the motion to dismiss, however, NAD submitted a certification contending that it was a subsidiary of Metro and an affiliated company. NAD also argues that it is a beneficiary to the contracts since the restrictive covenant and non-disclosure agreements expressly stated that the employees would be working for Metro or any of its affiliates.
Applying the standard on a motion for dismissal, NAD has pled sufficient facts to survive a motion to dismiss. Although it may turn out that the employees have contracts only with Metro, on the current record such a ruling cannot be made definitively. CAI argues that interpreting the restrictive covenants and non-disclosure agreements is purely a question of contractual interpretation. However, given NAD's contention that it is a subsidiary and affiliate of Metro, there is a need for at least some discovery on that issue.
2. NAD's Allegations of Wrongful Means.
NAD argues that it has identified facts which, if believed, would support a finding that CAI acted intentionally and maliciously in luring away its employees. In support of that contention, NAD alleges that CAI paid its employees bonuses when they attracted NAD "closers." NAD goes on to contend that CAI raided twelve of its closers in a two-year period. NAD also contends that CAI improperly used confidential information to solicit its closers. Finally, NAD alleges that CAI induced one of the former NAD employees to make a Facebook posting to disparage NAD and induce other NAD employees to join CAI.
CAI responds that none of those actions are sufficiently malicious or wrongful so as to constitute tortious interference. On a motion to dismiss, however, NAD's allegations must be accepted. Giving NAD the benefit of all favorable inferences, its allegations are sufficient to survive a motion to dismiss. Whether the claims can survive summary judgment following discovery is a separate matter that can be addressed at the appropriate time.
In short, applying the standard for evaluating a motion to dismiss under Rule 4:6-2(e), NAD has alleged sufficient facts to support both its claim of tortious interference with contracts and tortious interference with prospective economic advantage.
B. Unfair Competition
Unfair competition consists, in essence, of the misappropriation of a business's property by another business. N.J. Optometric Ass'n v. Hillman-Kohan Eyeglasses, Inc., 144 N.J. Super. 411, 427 (Ch. Div. 1976), aff'd, 160 N.J. Super. 81 (App. Div. 1978). Unfair competition, however, has also been described in broader terms: "There is no distinct cause of action for unfair competition. It is a general rubric which subsumes various other causes of action." C.R. Bard, Inc. v. Woodtronics Corp., 235 N.J. Super. 168, 172 (Law Div. 1989). The common law tort of unfair competition has historically been viewed as an umbrella for tortious interference claims. See Restatement (Third) of Unfair Competition §1 comment g (1995) (explaining that generally, when a competitor tortiously interferes with the business of another, this constitutes an unfair method of competition). Outside of the intellectual property context, unfair competition is not an independent cause of action. See, e.g. Columbia Broad. Sys. v. Melody Recordings, Inc., 134 N.J. Super. 368 (App. Div. 1975) (explaining the boundaries of imitating a competitor in the context of unfair competition).
Here, NAD has alleged that CAI, by improperly luring NAD's closers, "wrongfully obtained NAD's confidential and proprietary information" in the form of marketing techniques and methodologies. Although this underlies NAD's claims of tortious interference, it also can constitute an independent form of unfair competition. See Lamorte Burns & Co. v. Walters, 167 N.J. 285, 308-09 (2001) (explaining that the taking of confidential and proprietary property is "contrary to the notion of free competition that is fair"). Further, "information need not constitute a trade secret [to be legally protected], and indeed, may otherwise be publicly available. The key to determining the misuse of information is the relationship of the parties at the time of disclosure and the intended use of the information." Id. at 299 (citing Platinum Mgmt., Inc. v. Dahms, 285 N.J. Super. 274, 295 (Law Div. 1995)). In Lamorte two employees, one of whom had a restrictive covenant, left the plaintiff company to establish a new business and compete directly with their former employer. Id. at 291-93. In doing so, the former employees developed a targeted solicitation list based on information from their former employer's client files. Ibid. The Court found this to be contrary to the notion of fair competition. Id. at 309.
To succeed in its unfair competition claim, NAD must establish that its marketing methodologies constituted confidential and proprietary information based on the relationship of the parties involved and the intended use of the information. NAD is entitled to develop its claim through discovery because it has alleged facts sufficient to survive a motion to dismiss. Whether the claim can survive summary judgment thereafter is, again, a matter that can be addressed at the appropriate time.
C. Civil Conspiracy
A civil conspiracy is defined as
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.
[Banco Popular N. Am. v. Gandi, 184 N.J. 161, 177 (2005) (quoting Morgan v. Union Cty. Bd. of Chosen Freeholders, 268 N.J. Super. 337, 364 (App. Div. 1993), certif. denied, 135 N.J. 468 (1994)).]
A civil conspiracy requires two or more persons acting in concert. Ibid. NAD alleges that CAI acted in concert with its own employees to tortiously interfere with NAD's employment relationships. However, "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), rev'd in part, 127 N.J. 269 (1992). A corporation and its employees are not separate persons for the purpose of civil conspiracy, and a conspiracy cannot exist in the absence of two or more persons acting in concert. Thus, the trial court properly dismissed this count of NAD's complaint.
III.
On its cross-appeal, CAI contends that the trial court erred in not sanctioning NAD under N.J.S.A. 2A:15-59.1 and Rule 1:4-8. We review a trial court's decision on an application for fees or sanctions under an abuse of discretion standard. United Hearts v. Zahabian, 407 N.J. Super. 379, 390 (App. Div.) (citing Masone v. Levine, 382 N.J. Super. 181, 193 (App. Div. 2005)), certif. denied, 200 N.J. 367 (2009).
N.J.S.A. 2A:15-59.1 provides that a prevailing party in a civil action may be awarded reasonable costs and attorney's fees if the court finds that the complaint or defense of the non-prevailing party was frivolous. To be considered frivolous, the filing must be found to have been made in "bad faith, solely for the purpose of harassment, delay or malicious injury[,]" or made "without any reasonable basis in law or equity and could not be supported by a good faith argument for an extension, modification or reversal of existing law." N.J.S.A. 2A:15-59.1(b).
Rule 1:4-8(b) provides that a party may make a motion for sanctions against an attorney or pro se party that has filed a paper with a court for a frivolous purpose. The rule goes on to provide certain procedures that must be followed to qualify. The rule also imposes limitations on the amount that can be imposed as a sanction. R. 1:4-8(b) and (d). The conduct warranting sanctions under Rule 1:4-8 or fees under N.J.S.A. 2A:15-59.1 has been strictly construed and narrowly applied. McKeown-Brand v. Trump Castle Hotel & Casino, 132 N.J. 546, 561 (1993); Wyche v. Unsatisfied Claims & Judgment Fund of N.J., 383 N.J. Super. 554, 560 (App. Div. 2006).
Here, we discern no abuse of discretion by the trial court given the procedural context in which the court addressed the motion seeking fees and sanctions. Nevertheless, because we are reversing the dismissal of three of NAD's claims and remanding the matter, the prior procedural context no longer exists. Thus, we also reverse, without prejudice to reconsideration, the trial court's order denying CAI's motion for sanctions and fees. If CAI believes it has the grounds to refile its motion for fees and sanctions at a later stage of this litigation, that motion can be re-evaluated at that time.
Affirmed in part, reversed in part, and remanded for further proceedings in accordance with this opinion. We do not retain jurisdiction. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION