Title: Cameco, Inc. v. Gedicke

State: new-jersey

Issuer: New Jersey Supreme Court

Document:

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). POLLOCK, J., writing for a unanimous Court. In this appeal, the Court considers whether an employer may prove a prima facie case for an employee's breach of his duty of loyalty to the employer by proving, not that the employee directly competed with the employer, but that the employee merely assisted the employer's competitor. This appeal arises from the dismissal of the complaint at the conclusion of Cameco's case in a civil action tried by the court without a jury. The record established that Cameco, Inc. (Cameco) employed Donald Gedicke as a salaried traffic manager to arrange for the transportation of Cameco's food products. Unknown to Cameco, in 1990, during the course of his employment with the company, Gedicke and his wife, Priscilla Mueller, formed Newton Transport Service (Newton), through which they arranged for the transportation of goods for various companies, including two of Cameco's competitors. Although two of the distributors for which Newton arranged transportation sold the same products as Cameco, the trial court did not make any findings regarding the extent to which Gedicke, through Newton, assisted these distributors. Moreover, Cameco did not prove any specific compensatory damages such as lost sales, potential sales, profits, or customers. In addition, Cameco did not claim that Newton was a direct competitor of the company. However, the record did establish that Gedicke spent approximately fifteen minutes during each work day at Cameco on Newton's business. The remainder of Newton's business was conducted out of Gedicke's home, primarily by Mueller. In 1993, Cameco fired Gedicke for poor performance. To obtain the money he had paid into Cameco's pension fund, Gedicke signed an agreement not to compete with Cameco. Thereafter, when Cameco learned of Gedicke's activities with Newton, Cameco charged Gedicke with conversion, unjust enrichment, tortious interference with contractual rights and economic advantage, and breach of Gedicke's duty of loyalty as an employee. At the conclusion of Cameco's case, the trial court dismissed its complaint, finding that Gedicke's testimony was credible in contrast to that of Cameco and that Gedicke had not breached his duty of loyalty, that he had not acted for anyone whose interests conflicted with Cameco's, that his actions were not detrimental to Cameco, that Newton had not competed directly with Cameco, and that Cameco had not suffered any damages. Cameco appealed the dismissal of nearly all of the claims. The Appellate Division affirmed the dismissal of some of the claims, but reversed and remanded for a new trial on the claim of breach of the duty of loyalty, holding that the duty of loyalty may be breached by an employee whose actions do not rise to the level of direct competition with his employer and that mere assistance to a competitor of the employer is enough if the employee's actions are contrary to his or her employer's interests. The Supreme Court granted Gedicke's petition for certification. HELD: Gedicke's mere assistance to some of Cameco's competitors may constitute a breach of his duty of loyalty; Cameco adduced sufficient evidence to survive Gedicke's motion to dismiss. 1. When dismissing at the close of a plaintiff's case, a trial court should accept the credibility of witnesses only when their testimony is so persuasive that no reasonable person could disbelieve it. (pp. 12-13) 2. The scope of the duty of loyalty that an employee owes to an employer may vary with the nature of their relationship. Assisting an employer's competitor can constitute a breach of the employee's duty of loyalty. (pp. 14-15) 3. Whether an employee who has not obtained the employer's consent may engage in conduct that assists a competitor depends on the facts of each case. In some cases, the assistance may be so unintended or inconsequential that it will not result in a breach of the employee's duty of loyalty. (pp. 15-16) 4. While an employee's breach of the duty of loyalty can give rise to either equitable or legal relief, to recover money damages, the employer must establish that the employee's breach proximately caused the requested damages. (pp. 16-17) 5. In addition to more traditional damages, an employer may seek forfeiture of its employee's compensation. As with other aspects of breach-of-duty cases, the facts color an employer's right to recoup compensation. (pp. 17-21) 6. Various considerations affect determination of the breach of an employee's duty of loyalty and the appropriate remedy for a breach, including forfeiture of the employee's compensation. Absent a governing contractual provision, the judicial task is to search for a fair and reasonable solution in light of the relevant considerations. (pp. 21-22) 7. If, on remand, the trial court concludes that Gedicke breached his duty of loyalty to Cameco, the court must then consider the appropriate remedy. (pp. 22-24) Judgment of the Appellate Division is AFFIRMED as modified, and the matter is REMANDED to the Law Division. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN, GARIBALDI, STEIN, and COLEMAN join in JUSTICE POLLOCK's opinion. SUPREME COURT OF NEW JERSEY A- 121 September Term 1997 CAMECO, INC., Plaintiff-Respondent, v. DONALD GEDICKE, individually and d/b/a NEWTON TRANSPORT SERVICE, NEWTON TRANSPORT SERVICE and PRISCILLA MUELLER, Defendants-Appellants. Argued September 14, 1998 -- Decided February 18, 1999 On certification to the Superior Court, Appellate Division, whose opinion is reported at 299 N.J. Super. 203 (1997). James F. Keegan argued the cause for appellants (Bendit Weinstock, attorney; Mr. Keegan and Sherri Davis Fowler, on the briefs). Robert P. Donovan argued the cause for respondent (Fox & Fox, attorneys). The opinion of the Court was delivered by POLLOCK, J. This appeal concerns the liability of an employee for a breach of the duty of loyalty owed to his employer. The primary issue is whether the employer may prove a prima facie case for an employee's breach of that duty by proving, not that the employee directly competed with the employer, but that the employee merely assisted the employer's competitor. At the close of plaintiff's case, the Law Division dismissed the complaint, which asserted various claims in addition to the one alleging the employee's breach of his duty of loyalty. The Appellate Division affirmed the dismissal, except for the claims relating to the breach of the duty of loyalty. Cameco v. Gedicke, 299 N.J. Super. 203 (App. Div. 1997). We granted Gedicke's petition for certification, 151 N.J. 471 (1997), and now affirm. CHIEF JUSTICE PORITZ and JUSTICES HANDLER, O'HERN, GARIBALDI, STEIN, and COLEMAN join in JUSTICE POLLOCK's opinion. NO. A-121 CAMECO, INC., Plaintiff-Respondent, v. DONALD GEDICKE, individually and d/b/a NEWTON TRANSPORT SERVICE, NEWTON TRANSPORT SERVICE and PRISCILLA MUELLER, Defendants-Appellants. DECIDED