Opinion
DOCKET NO. A-2732-12T1
09-02-2014
TEMPLE-INLAND, INC., a Delaware Corporation, Plaintiff-Respondent/ Cross-Appellant, v. KENNETH DEE, Defendant-Appellant/ Cross-Respondent
Michael J. Convery argued the cause for appellant/cross-respondent. Rudy S. Randazzo argued the cause for respondent/cross-appellant (Riker, Danzig, Scherer, Hyland & Perretti, LLP, and Lawrence J. McNamara (Ford Harrison, LLP) of the Texas bar, admitted pro hac vice, attorneys; Mr. McNamara and John M. Pellecchia, of counsel; Mr. McNamara, on the brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Sapp-Peterson, Maven, and Hoffman. On appeal from the Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-1351-11. Michael J. Convery argued the cause for appellant/cross-respondent. Rudy S. Randazzo argued the cause for respondent/cross-appellant (Riker, Danzig, Scherer, Hyland & Perretti, LLP, and Lawrence J. McNamara (Ford Harrison, LLP) of the Texas bar, admitted pro hac vice, attorneys; Mr. McNamara and John M. Pellecchia, of counsel; Mr. McNamara, on the brief). PER CURIAM
Plaintiff, Temple-Inland, Inc., appeals the trial court order granting summary judgment to defendant, Kenneth Dee, dismissing its claims against him alleging breach of fiduciary duty and misappropriation of confidential and proprietary information. Defendant cross-appeals the dismissal of his counterclaim alleging breach of contract and breach of the Wage and Payment Law. We affirm in part and reverse in part.
I.
Plaintiff is a leading manufacturer of cardboard boxes utilized by various industries. Plaintiff employed defendant as a sales representative. Defendant worked for plaintiff for fourteen years before resigning in 2010. At the time defendant commenced his employment, he signed a confidentiality agreement. Defendant's compensation included a base salary and commissions based upon sales.
In 2009, plaintiff introduced an Account Manager Incentive Plan (the "Plan") to the sales workforce, which changed the structure of how commissions were earned. Under the new system, commissions were calculated based upon account assignments from the previous month's sales. The Plan established tiers of commission, and any changes required approval from the regional vice president.
In accordance with the Plan, plaintiff adjusted defendant's tiers. Defendant questioned the characterization of the tiers following an audit. When he complained about the tier restructuring, he was told plaintiff would look into the matter. Defendant believed the audit revealed he was being underpaid. He spoke with plaintiff's regional vice president (RVP) of sales and marketing, Roy Lind, in March 2010. Lind told him the tier audit was completed, that some sales representatives had been hit very hard, and efforts were being made to adjust the pay for those representatives. Lind also stated defendant was on the other end of the spectrum and he "was not going to pay [defendant] a million dollars to sell boxes." Defendant decided at that time to pursue other employment. He met with Lind again in August 2010 at the Philadelphia Airport Marriott Hotel, where Lind told him he would be paying him a Tier 1 commission, the lowest tier level, as of January 2011.
Defendant accepted a sales representative job with Packaging Company of America ("PCA") on August 27, 2010. In the two weeks between his acceptance of the PCA job offer and his resignation, defendant downloaded information from plaintiff's password-protected computer system onto a personal hard drive, plaintiff's then-current pricing lists and account information from his sales accounts. Prior to his last day, defendant visited the offices of Church & Dwight, his largest client, to inform them of his resignation and to solicit business.
On defendant's final day with plaintiff, he received an email from Church & Dwight referencing a Request For Proposal (RFP) for forty-pound cat litter boxes and informing him of a bidders' meeting to be held later in September 2010. Mark Hallman, a forensic computer analyst, analyzed defendant's work computer and determined the email was opened. Defendant made no mention to plaintiff of that email, the RFP or the bidders' meeting. Plaintiff consequently missed the bidders' meeting, subsequently learned of the RFP, and prepared a bid at the last minute. Defendant participated in discussions about the RFP on PCA's behalf with Church & Dwight.
While employed by PCA, defendant utilized plaintiff's price lists to identify prospective customers for PCA. Defendant prepared and submitted a bid to Starborn Industries, a company he identified through downloading information from plaintiff's password protected computer prior to his resignation. Defendant indicated he was awarded "one order for an item that was not on the Temple-Inland price list." Defendant also utilized the information derived from plaintiff to solicit business from Barnes and Noble.
On November 10, 2010, plaintiff filed a verified complaint and order to show cause against defendant, alleging breach of fiduciary duty and misappropriation of confidential and proprietary information. Plaintiff sought damages and to permanently enjoin defendant from using and disclosing misappropriated information. On February 28, 2011, defendant filed an answer and separate defenses to the verified complaint, as well as a counterclaim, alleging breach of contract, equitable estoppel, and violation of the Wage Payment Law, N.J.S.A. 34:11-1 to -33.6. Plaintiff filed its answer to the counterclaim and separate defenses on June 27, 2011.
Defendant filed a motion for summary judgment dismissing plaintiff's claims. On July 11, 2012, plaintiff filed a cross-motion for summary judgment to dismiss defendant's claims. The trial court granted defendant's summary judgment motion and dismissed all of plaintiff's claims, finding plaintiff failed to demonstrate actual injury or to set forth actual damages. However, the court granted a permanent injunction "to ensure that the information obtained by [defendant] cannot be used against [plaintiff] in the future." The court also granted plaintiff's motion for summary judgment, dismissing defendant's breach of contract claims, violation of the New Jersey Wage Payment Law, N.J.S.A. 34:11-1 to -33.6, unjust enrichment and quantum meruit claims.
On January 7, 2013, the trial court entered the orders granting plaintiff's and defendant's motion for summary judgment. Both parties appealed.
On appeal, defendant contends the court should have considered extrinsic evidence to interpret the meaning of the 2009 Plan because the Plan is ambiguous on its face, plaintiff should be estopped from refusing to pay commissions he earned, given that plaintiff led him to believe his tiers would be adjusted based upon a six-month audit, and that plaintiff violated the Wage Payment Law when it changed his commission compensation retroactively.
In its cross-appeal, plaintiff contends it showed an adequate measure of damages, as a result of defendant's breach of the duty of loyalty, sufficient to defeat summary judgment on that claim, and the court erred when it dismissed its claims against defendant asserting misappropriation of confidential information and breach of defendant's fiduciary duty owed to plaintiff.
II.
Our review of the grant or denial of a summary judgment motion is de novo, applying the same standard used by the motion judge under Rule 4:46-2(c). Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330 (2010); Chance v. McCann, 405 N.J. Super. 547, 563 (App. Div. 2009). We first consider whether there exists a genuine issue of material fact, and in viewing the competent evidential materials "in the light most favorable to the non-moving party, are sufficient to permit a rational factfinder to resolve the alleged disputed issues in favor of the non-moving party." See Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 540 ( 1995); see also R. 4:46-2(c). If the evidence is "'so one-sided that one party must prevail as a matter of law,'" then summary judgment should be granted. Ibid. (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202, 214 (1986)). Next, we decide whether the motion judge's application of the law was correct. Atl. Mut. Ins. Co. v. Hillside Bottling Co., 387 N.J. Super. 224, 231 (App. Div.), certif. denied, 189 N.J. 104 (2006). In that regard, the motion judge's conclusions of law are not accorded any special deference. Estate of Hanges v. Metro. Prop. & Cas. Ins. Co., 202 N.J. 369, 382-83 (2010).
A.
"A basic principle of contract interpretation is to read the document as a whole in a fair and common sense manner." Hardy v. Abdul-Matin, 198 N.J. 95, 103 (2009). "If the terms of a contract are clear, they are to be enforced as written." Malick v. Seaview Lincoln Mercury, 398 N.J. Super. 182, 187, (App. Div. 2008) (citing Cnty. of Morris v. Fauver, 153 N.J. 80, 103 (1998)). On the other hand, "[w]here a contract is ambiguous, courts will consider the parties' practical construction of the contract as evidence of their intention and as controlling weight in determining a contract's interpretation[.]" Fauver, supra, 153 N.J. at 103.
Ambiguity in a "contract exists if the terms of the contract are susceptible to at least two reasonable alternative interpretations." Schor v. FMS Fin. Corp., 357 N.J. Super. 185, 191 (App. Div. 2002). The meaning of the terms of an agreement is determined by the "objective manifestations of the parties' intent." Ibid. A reviewing court should not "torture the language of [a contract] to create ambiguity." Ibid. "[I]n the quest for the intention, the situation of the parties, the attendant circumstances, and the objects they were striving to attain are necessarily to be regarded." Atl. N. Airlines v. Schwimmer, 12 N.J. 293, 301 (1953).
To discover the intention of the parties, and to determine whether a contract is ambiguous, courts may consider extrinsic evidence offered in support of conflicting interpretations. Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, 268-69 (2006). "Evidence of the circumstances is always admissible in aid of the interpretation of an integrated agreement, even where the contract is free from ambiguity, not for the purpose of changing the writing, but to secure light by which its actual significance may be measured." Newark Publishers' Ass'n v. Newark Typographical Union, 22 N.J. 419, 427 (1956).
Extrinsic evidence may include the conduct of the parties that reflects their understanding of the contract's meaning. In re Teamsters Indus. Emp. Welfare Fund, 989 F.2d 132, 135 (3d Cir. 1993). Subsequent dealings of the parties under the contract may also be considered to illuminate the parties' understanding. Restatement (Second) of Contracts § 202(4) (1979).
The motion judge found no ambiguity in the language of the contract as it related to tier determinations as defendant alleges. Rather, the judge found the plain language of the provision, which stated "[t]ier audits do not automatically change tiers. . . .[and] will need RVP approval before they are changed," explicitly provided that employees are not entitled to automatic tier changes.
Defendant asserts the language is ambiguous, requiring an examination of extrinsic evidence consisting of the course of conduct. However, defendant does not present any evidence that creates a genuine issue of material fact in the Plan's interpretation.
The Plan's language clearly provides "[o]nce a tier has been assigned to the account it will only be changed with an approved tier assignment. An approved tier assignment or change is required for audit reasons and must be approved by plant management." The Plan also explicitly provides that "[t]ier audits do not automatically change tiers. The changes will need RVP approval before they are changed." Thus, it is clear, and not subject to multiple interpretations, that tier changes are not automatic and require approval from the RVP. Therefore, defendant failed to demonstrate there was any ambiguity in the terms of the contract necessitating the resort to extrinsic evidence to ascertain the intent of the parties.
B.
Defendant also sought relief based upon promissory estoppel, which the trial court rejected. On appeal, however, he does not continue to advance his theory of recovery premised upon promissory estoppel. Therefore, as plaintiff urges, defendant has abandoned this claim. In re Bloominqdale Convalescent Ctr., 2 33 N.J. Super. 46, 48 n.1 (App. Div. 1989)(stating that any issue not briefed is usually deemed waived). On the other hand, defendant claims the court erred in dismissing his equitable estoppel claim. Although defendant urged relief based upon equitable estoppel in the brief submitted in opposition to plaintiff's summary judgment motion, that issue was not argued during oral argument nor addressed in the court's oral statement of reasons. Because the issue was raised in defendant's brief and, given our de novo review, we address the issue. State v. Arthur, 184 N.J. 307 (2005) (stating that while an appellate court will consider allegations of error not brought to the trial judge's attention, it frequently declines to consider issues that were not presented below)
"Equitable estoppel does not require a definite promise, but may be invoked when there is 'conduct, either express or implied, which reasonably misleads another to his prejudice so that a repudiation of such conduct would be unjust in the eyes of the law.'" Segal v. Lynch, 211 N.J. 230, 254 (2012) (quoting McDade v. Siazon, 208 N.J. 463, 480 (2011)). "The essential elements of equitable estoppel are a knowing and intentional misrepresentation by the party sought to be estopped under circumstances in which the misrepresentation would probably induce reliance and reliance by the party seeking estoppel to his or her detriment." O'Malley v. Dep't of Energy, 109 N.J. 309, 317 (1987) (citing Horsemen's Benevolent & Protective Ass'n v. Atlantic City Racing Ass'n, 98 N.J. 445 (1985); Miller v. Miller, 97 N.J. 154, 163 (1984). To prove equitable estoppel, there must be a "knowing and intentional misrepresentation" which results in the party seeking estoppel to rely to his or her detriment. D'Agostino v. Maldonado, 216 N.J. 168, 200 (2013) (quoting O'Malley, supra, 109 N.J. at 317 (1987). "Equitable estoppel is based on the principles of fairness and justice." Ibid. (citing Knorr v. Smeal, 178 N.J. 169, 180 (2003)).
Here, there is a genuine question of material fact whether plaintiff misled defendant into believing his tiers would be changed following the audit. Defendant certified that Lind told him the company would address the discrepancies in his tiers by performing an audit. After the audit, Lind told defendant that plaintiff was not going to adjust his tiers and he would be paid the lowest commission rate for his prime account, Church & Dwight. During oral argument, plaintiff's counsel represented that "Mr. Dee was making so much money, the executive vice president for sales basically said he's making way more than everybody else, we're not going to pay him this much money, freeze his tiers." When the judge queried, "[b]ut that same policy was not followed for every other . . . individual[]," plaintiff's counsel responded, "No Your Honor. . . . It was not." Therefore, the trier of fact could find that plaintiff's conduct of implementing a Plan to pay commissions and adjusting the Plan for one person that "mak[es] way more than everyone else," is intrinsically unfair and unjust, which is a basic principle of equitable estoppel. See D'Agostino, supra, 216 N.J. at 200. Thus, defendant is entitled to submit his equitable estoppel claim to the trier of fact because a genuinely disputed issue of fact exist as to whether plaintiff knowingly misrepresented that defendant's tier would be adjusted following the audit. Plaintiff's failure to do so resulted in defendant's loss of greater commissions.
III.
Defendant contends the court erred in granting summary judgment dismissing his wage and hour claim against plaintiff because the evidence was undisputed that plaintiff unilaterally changed the basis for his commissions after he earned them and failed to inform him of the change until one year after the terms were actually changed. In response, plaintiff contends defendant's tiers were not retroactively changed because they were not changed at all, pointing to the unambiguous language in the Plan that once a tier has been assigned to an account, it will only be changed with managerial approval, which did not occur here.
N.J.S.A. 34:11-4.6(b) provides in pertinent part that "[e]very employer shall . . . [n]otify his employees of any changes in the pay rates . . . prior to the time of such changes." N.J.S.A. 34:11-4.1(c) defines the "wages" subject to this provision as including "direct monetary compensation for labor or services rendered by an employee, where the amount is determined on a . . . commission basis." Thus, "the Wage Payment Law requires an employer to give advance notice to any employee paid on a commission basis of any change in the method by which his or her commissions are calculated." Winslow v. Corp. Express, Inc., 364 N.J. Super. 128, 135 (App. Div. 2003).
The motion judge found that once a tier was assigned, defendant received commissions based on that assignment, for which he had advanced notice. However, while the Plan was clear as to how the tiers would be changed, plaintiff's decision to "freeze" defendant's tier assignment regarding Church & Dwight, based on the fact that he received more money than everyone else cannot be viewed as having given defendant the statutory advance notice. When the facts are viewed most favorably to defendant, Brill, supra, 14 2 N.J. at 540, defendant was not informed, nor did the Plan suggest, that his tiers would be based on how much he received, or that plaintiff would adjust the commission downward if an account manager was making too much money. Further, the concession that this practice was not implemented for every individual creates a question of fact regarding notice requirements under the statute.
IV.
In its cross-appeal, plaintiff contends the trial court erred when it granted summary judgment in favor of defendant on its claim that defendant breached his duty of loyalty owed to plaintiff. The trial court concluded that "even if it could be proven that [defendant] knew about the RFP and breached his duty of loyalty by acting contrary to [plaintiff's] interests, [plaintiff's] inability to prove damages necessitates a grant of summary judgment in favor of [defendant]." We agree.
An employee has a duty, during his or her period of employment, not to act contrary to the employer's interest, not to compete with his or her employer, and not to assist an employer's competitor. Lamorte Burns & Co. v. Walters, 167 N.J. 285, 302, (2001); Cameco, Inc. v. Gedicke, 157 N.J. 504, 516, (1999). "An employee's duty of loyalty to his or her employer goes beyond refraining from privately soliciting the employer's customers while still employed. The duty of loyalty prohibits the employee from taking affirmative steps to injure the employer's business." Lamorte Burns, supra, 167 N.J. at 305.
An employee has the right to plan and prepare for future employment, but in doing so, is not entitled to solicit customers or do other acts in direct competition with the employer's business. Id. at 302, 304. Thus, in the absence of a covenant not to compete after termination of employment, an employee
may anticipate the future termination of his employment and, while still employed, make arrangements for some new employment by a competitor or the establishment of his own business in competition with his employer. The only restriction to such action is that he may not solicit his employer's customers for his own benefit before he has terminated his employment. Nor may he do other similar acts in direct competition with the employer's business. This would constitute a breach of the undivided loyalty which the employee owes to his employer while he is still employed. It is the nature and character of the act performed that will determine if there has been an actionable wrong and whether or not the act has caused some particular injury to the employer. The mere planning, without more, is not a breach of an employee's duty of loyalty and good faith to his employer.
[Auxton Computer Enters., Inc. v. Parker, 174 N.J. Super. 418, 423-24 (App. Div. 1980 (citations omitted).]
"An employer may prove a prima facie case of an employee's breach of the duty of loyalty not only by showing that the employee directly competed with the employer while employed, but also by showing that the employee while employed assisted the employer's competitor." Lamorte Burns, supra, 165 N.J. at 303. Depending on the facts of the case, an employee's breach of the duty of loyalty can give rise to either equitable or legal relief. See United Board & Carton Corp. v. Britting, 63 N.J. Super. 517 (Ch. Div. 1959), aff'd, 61 N.J. Super. 340 (App. Div.), certif. denied, 33 N.J. 326 (1960) (awarding equitable relief instead of damages). Equitable relief is a nonmonetary remedy obtained when monetary damages cannot redress the injury. Black's Law Dictionary 1297 (7th ed. 1999). In an appropriate case, damages may include profits the employee earned in another enterprise while still employed. See Chernow v. Reyes, 239 N.J. Super. 201, 205 (App. Div.), certif. denied, 122 N.J. 184 (1990). Damages may also include compensation for a direct injury suffered by the employer as a result of the employee's breach. See United Board & Carton, supra, 63 N.J. Super. at 532-33. Thus, "[a]n agent is subject to liability for loss caused to the principal by any breach of duty." Restatement (Second) of Agency § 401. An employer may recover the value of a lost opportunity if the employee usurped a corporate opportunity or secretly profited from a competitive activity. Cameco, supra, 157 N.J. at 518.
The evidence in the record unquestionably supports a finding that [defendant] breached his duty of loyalty. While still employed, defendant sent an email to a direct competitor in which he identified price lists of plaintiff's clients. Defendant also provided the competitor with a copy of his territory management plan. In addition, defendant saved information from his employer's computer's hard drive to access their clients for the sole purpose of soliciting these clients on behalf of his new employer.
The motion judge granted equitable relief to plaintiff by permanently enjoining defendant from engaging in further conduct of this nature, but granted summary judgment in favor of defendant because plaintiff failed to produce any evidence of such monetary damages caused by defendant, which defendant stated were "incalculable." In order to be entitled to such relief, plaintiff must prove damages. While, plaintiff urged that defendant's compensation should be considered as its measure of damages, the trial court properly rejected this position. Plaintiff failed to present any evidence segregating out what portion of his compensation can be directly linked to the breach, which resulted in an injury to it. See United Board & Carton, supra, 63 N.J. Super. at 532-33. There is no evidence that plaintiff lost customers, sales, or potential sales that were in progress as a result of defendant's conduct. See Cameco, supra, 504 N.J. at 522.
V.
Plaintiff argues the motion judge erred in finding it failed to produce damages to support its claims "concerning [defendant's] misappropriation of [plaintiff's] confidential information." Plaintiff also argues defendant received a $1000 order from one of plaintiff's customers, solely by downloading pricing and customer data in his final days and utilizing the information to solicit business on behalf of his new employer. Therefore, plaintiff argues it demonstrated sufficient damages to avoid summary judgment.
To be legally protectable, information need not rise to the level of a trade secret and may otherwise be publicly available. Lamorte Burns, supra, 167 N.J. Super. at 299. 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. Ibid. Matters of general knowledge within an industry may not be classified as confidential. Whitmyer Bros., Inc. v. Doyle, 58 N.J. 25, 33-34 (1971).
Similarly, customer lists can be considered confidential and subject to protection. However, where an entity's customers are a matter of general knowledge in an industry, or are easily discernable, and personal contacts are taken from job to job, the rule is different. Lamorte Burns, supra, 167 N.J. at 299; see also Subcarrier Commc'ns, Inc. v. Day, 299 N.J. Super. 634, 642-43 (App. Div. 1997).
Here, while it is undisputed that defendant misappropriated information, there is no evidence that he received the order solely by downloading the pricelists and customer data in his final days. Furthermore, the evidence in the record demonstrates the $1000 order did not affect plaintiff because the product, which was the subject of the order, was not a product plaintiff ordinarily provided to the customer.
VI.
Finally, plaintiff contends the court erred in dismissing its claim defendant breached his fiduciary duty owed to it. The motion judge found an issue of fact existed regarding whether defendant deliberately withheld information about a request for a proposal from his major client, Dwight & Church, which he received on his last day of work. The judge nonetheless granted summary judgment in favor of defendant because plaintiff failed to present any evidence of any resulting damage. The proposal related to a request for forty-pound cat litter boxes. Defendant failed to disclose this RFP or the upcoming bidders' meeting to plaintiff. Plaintiff missed the bidders' meeting, but nonetheless submitted a bid at the last minute. Defendant later participated in discussions about the RFP on behalf of his new employer.
Viewing the facts in the light most favorable to plaintiff, Brill, supra, 142 N.J. at 540, a genuinely disputed issue of fact existed as to whether plaintiff deliberately withheld information about the RFP. It is undisputed that defendant was aware of the meeting because he attended a meeting with Dwight & Church where the cat litter project was discussed. Once again, although the record supports the conclusion that there was a breach, plaintiff presented no evidence of any resulting damage. We note there is no evidence that defendant's new employer won the bid or, for that matter, which company was awarded the bid.
Summary judgment entered in favor of plaintiff is reversed and the matter remanded for further proceedings. The orders granting summary judgment on plaintiff's claims and defendant's remaining cross-claims are otherwise affirmed.
Reversed in part and affirmed in part. 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