2010 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 7-8-2010 

# In Re T arget Ind Inc P r e c e de nt i al or N on-P r e c e de nt i al : N on-P r e c e de nt i al D ocke t N o . 09-3343

F o llow thi s and a dd it ion al work s at : http://d i git alc ommon s .l a w . vi ll anova . e du/thir dc ir c uit_2010

Thi s de c i sion i s br ou ght t o you for f r e e and ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i ll anova U nive r sity S choo l of L a

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. F or mor e inform at ion, p le as e c ont a ct Be n j amin . C arl s on@l a

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" In Re T arg e t Ind Inc " (2010). 2010 D e cisio n s . P ape r 987. http://d i git alc ommon s .l a

w . vi ll anova . e du/thir dc ir c uit_2010/987NOT P RE CE DE NT I AL UN I TED STATES CO UR T OF A PP EALS F O R T H E T H IR D C IR C U IT N os . 09- 3343/ 3344 IN R E : T A R G E T IN D U S T R IE S , IN C . a n d L A N C E P L A S T IC S , IN C .,

D eb tors T HOMAS F . F OX a n d RO BE RT B. WAS S E RMAN, CH AP T E R 1 1 T RU S T E E F OR

TARGET I NDU S TRI ES , I NC. a n d LANCE P LAS TI CS , I NC. v. M A R T IN G O Z , S R .; M A R T IN G O Z , JR .; T A R G E T IN D U S T R IA L P K G ., IN C .; TRI - COR CORP ORATI ON; GLE NN PI ERS ON; GUY ZI M M ERMA NN; ROBER T GOL DS T E I N; J E F F RE Y F RA WLE Y; M I CH AE L GR AS S M AN; S HAWN HI L L I NG; DE NNI S P E T RE Y; WI L L I AM T RO T T A; NE XUS P L AS T CS , I NC . ; DONAL D M E RWI N; ALF RED T EO; P OLY P LAS TI CS P RODUCTS , I NC. ; BET A PL AST I CS CO RP OR AT I ON; S T E VE N R E DL I CH ; RO BE RT GOZ ; AR L E NE GOZ ; DONNA ZI M M ERM AN N; KI M PI ERSON ; GO ZM AN , I NC . , d /b / a PLASTI CS BAG OU TLET; A B C C O M PA N I E S, 1- 20, s ai d names be i ng fi ct i t i ous , J O H N D O E S 1 - 20, s ai d names

bei ng fi ct i t i ous , and J A N E D O E 1- 20, s ai d names be i ng fi ct i t i ous T H O M A S F. FO X ; T A R G E T H O L D I N G S, I N C . , T A R G E T I N D U ST R I E S, I N C . and RO BE RT B. W A SSER M A N , CH A PTER 11 TR U STEE FO R T A RG ET I N D U STR I ES, I NC. a n d LANCE P LAS TI CS , I NC.

v. T IF F A N Y P A C K A G IN G ; SH A R E N W IL M S , a/k/a S H A R E N B A C C A R E L L A ; M A R T IN GOZ , S R. ; M AR T I N GOZ , J R. ; T AR GE T I NDUS T RI AL P KG. ; T RI - CO R CO RPORA TI ON ; GLEN N PI ERSON ; GU Y ZI M M ERM AN N; AR LENE G OZ; RI TA G O Z ; A N G E L A P F E IF E R ; G O Z M A N , IN C . d /b /a P L A S T IC B A G O U T L E T ; A B C C O M PA N I E S 1- 20, s ai d names be i ng fi ct i t i ous , J O H N D O E S 1- 20, s ai d names be i ng

fi ct i t i ous , and J A N E D O E S 1- 20, s ai d names be i ng fi ct i t i ous2

T hom as F. Fox; R obertB . W as s erm an, C hapt er11 T rus t ee f orT ar getI ndus tr i es , I nc. , and L ance Pl as t i cs , I nc. ; T ar getH ol di ngs , I nc. , T ar getI ndus tr i es , I nc. , and L ance Pl as t i cs , I nc. A p p e lla n ts in 0 9 -3 3 4 3 . T r i - C o rC o rp o r a t i o n ; D o n n a Z i m m e r m a n n ; G u y Z i m m e r m a n n ; J e f f r e y T . F r a w l e y; M ic h a e l G ra s s m a n ; S h a w n H illin g ; D e n n is P e tr e y , A ppel l ant s i n 09- 3344

O n A p p ea l from the U n it ed S tat es D istri ct C o u rt

forthe D i s tr i ctof N ew J er s ey ( D . C . N o. 3- 09- cv- 00037) D i s tr i ctJ udge: H onor abl e A nne E. T hom ps on Subm i t t ed underT hi r d C i r cui tL A R 34. 1( a)

on M ay14, 2010 B efor e: B A R R Y and R O T H , C i r cui tJ udges and D A L Z E L L *, D i s tr i ctJ udge ( O pi ni on fi l ed: J ul y8, 2010)

O P I N I O N RO T H, C i r cui tJ udge: A p p e lla n ts T h o m a s F o x a n d R o b e rt W a s s e rm a n , a s tru s te e f o r T a rg e t I n d u s tr ie s , In c ., a n d L a n c e P la s tic s , In c ., a n d C ro s s -A p p e lla n ts M a rt in G o z , S r., e t a l. , appea l the D i s t r i ct C our t ’ s aff

i r m ance of the B ankrupt cyC our t ’ s or derdi s m i s s i ng thei rcl ai m s and *H onor abl e St ew artD al zel l , U ni t ed St at es D i s tr i ctJ udge forthe East ern D i s tr i ctof P e n n s y lv a n ia , s ittin g b yd e s ig n a tio n .Th e Ba n k ru p t c yCo u r th a d j u r i s d i c t i o n o v e rth e a d v e r s a ryp r o c e e d i n g u n d e r2 8 U. S . C. 1 § § 1 5 7 a n d 1 3 3 4 , a n d th e D i s tr i c tC o u r th a d j u r i s d i c t i o n t o r e v i e w th e B a n k ru p t c y C o u r t 's fi nal or derunder28 U . S. C . § 158( a) ( 1) . W e have j ur i s di ct i on under28 U . S. C . §§ 158( d) and 1291. “W e exe r ci s e pl enaryr evi ew of the D i s tr i ctC our t ' s concl us i ons of l aw . Si nce the D i s tr i ctC our ts atas an appe l l at e courtt o r evi ew the B ankrupt cyC our t , w e r evi ew t he B ankrupt cyC our t ' s l egal det erm i nat i ons de novo, i t s fac tual fi ndi ngs forcl earerr or , and i t s exer ci s es of di s cr et i on forabus e ther eof. ” In r e T o w e rA ir, In c ., 397 F. 3d 191, 195 ( 3d C ir . 2 0 0 5 ) (i n terna l ci tat ion s an d q u o tat ion m ark s o m itted). F o x p u r s u e d s i x t e e n c a u s e s o f a c t i o n a g a i n s ta l l th e T r i - Co rd e f e n d a n t s a n d two 2 a g a in st Z im m e rm a n n in d iv id u a lly . T h e six tee n c a u se s o f a c tio n w e re a s f

o llo w s: m i s a p p r o p r i a t i o n o f

a s s e t s a n d p r o p r i e t a ry i n f o r m a t i o n , b r e a c h o f

c o n tr a c t , c o n s p i r a c y, br eac h of l oy al tyand conf i dent i al i ty , br eac h of cove nantof good fa i th and fa i rdeal i ng, unfai rcompet i t i on, t or t i ous i nt er fer ence w i th contr actual r el at i ons , conver s i on, fr aud, c i v i l RI CO , p i e r c i n g th e c o rp o r a t e v e i l , a n d s e v e r a l b a n k ru p t c yc a u s e s o f a c t i o n . T h e t wo caus es of ac t i on pur s ued aga i ns tZ i m m erm ann w er e forbr eac h of fi duci arydut i es and for fra u d u lent tr an sfe r. 3 c o u n t e r c l a i ms . F o rth e r e a s o n s d i s c u s s e d b e l o w, we wi l l a f f i r m. 1 I . I nt roduct i on T hom as Fox boughtthe as s et s of the cons ol i dat ed bankrupt cyes t at e of Tar getand L a n c e , N e w Je rse yc o rp o ra tio n s in th e b u sin e ss o f d istrib u tin g a n d m a n u f a c tu rin g p las tic b ag s. F o x , alon g w ith the T rustee o f th e b an k rup tcyestate, th en co m m en ce d an ad v ersa ry p roc ee d ing in the B an k rup tcyC o u rtag ains t fo rm er T arg et pe rson n el w h o h ad left t o w o rk fora compet i t or , T r i - C orC orpor at i on. T r i - C orw as ow ned bya form erT ar getO ffi cer , G uy Z i m m erm ann. Fox soughtdamages fr om thes e form erempl oy ees and Zi m m erm ann ( col l ect i vel y , the Tri - C ordefe ndant s ) , al l egi ng var i ous bus i nes s t or t s , i ncl udi ng the m i sapprop ri at i on of T arget ’s cust om er l i st s, t ort i ou s i nter ference w i th co ntr actual r el at i on s, and br eac h of dutyof l oy al ty . T he def endant s count er cl ai m ed, al l egi ng thatFox had 2T he T ri -C or defen dan t s’ cou nter cl ai m s w ere for unfaircom peti t i on , anti trust 3 viol at i on s, L anh am A ctviol at i on s, t ort i ou s i nter ference w i th co ntr actual r el at i on s, conver s i on, and def

amat i on. Speci fi cal l y , the j udge di s m i s s ed the ci vi l R I C O countand the count s al l egi ng br eac h 4 of co ntr actand breach o f t he co ven ant of go od fai th an d fairdeali ng , excep tas t o those defe nd ants hav i ng em ploym ent cont ract s or com m i ssi on agreem ents . 4 att em p ted to sca re f

o rm er T arg et cli en ts from d o ing b u sine ss w ith T ri -C o r. 3 A ft erboth part i es m oved fors um m aryj udgm ent , the B ankrupt cyJ udge di s m i s s ed thr ee c ount s i n t he compl ai nt , butotherw i s e deni ed the mot i ons . Fol l ow i ng an uns ucce s s ful 4 i n t e r l o c u t o r ya p p e a l o f

th i s o r d e r , th e c a s e wa s r e ma n d e d t o th e Ba n k ru p t c yCo u r t , th i s t i me befor e anotherj udge. T hi s j udge conduc t ed a 14- daytr i al , atthe end of w hi ch he di s m i s s ed ev eryclaim in the p roc ee d ing s. T h e D istri ct C o u rtaf firm ed the B an k rup tcyC o u rto rde r, ado pti ng i t s r easoning an d an al y si s. O n a p p e a l to th is C o u rt, F o x c o n ten d s th a t th e B a n k ru p tcy C o u rt e rro n e o u sly d e ter m in e d th a t (1 ) T a rg e t’s c u sto m e r lists w e re n e ith e r p ro p rie tar yin f o rm a tio n n o r p ro p e rty of the es t at e, ( 2) the Tri - C ordefe ndant s di d notbr eac h anydutyof l oy al tyt o T ar get , ( 3) Z i m m erm ann di d notbr eac h anyfi duci arydut i es t o T ar getand w as notl i abl e forfr audul ent convey ance s under11 U . S. C . §§ 544( b) and 548, and ( 4) the Tri - C ordefe ndant s di d not t or t i ous l yi nt er fer e w i th T ar get ’ s contr actual r el at i ons . T he Tri - C ordefe ndant s , i n tur n, a lleg e th a t th e B a n k ru p tcy C o u rt e rre d in f in d in g th a t th e re w a s in su f f icie n t ev id e n c e to supp orttheircou nter cl ai m s.5

II. D i s cus s i on A . P ropri et ary Inf

orm at i on A s the B ankrupt cyC our tfound, cus t om erl i s t s m aybe pr opr i et aryi nform at i on under N ew J er s eyl aw , dependi ng on the natur e of the bus i nes s and the r es tr i ct i ons pl ace d on e m p lo y e e s . L am ort e B urns & C o. v. W alters , 770 A . 2d 1158, 1166 ( N . J . 2001) . C us t om er l i s t s of s ervi ce bus i nes s es r ece i ve s peci al pr ot ect i on beca us e the names and addr es s es of c u s to m e rs a re n o t p u b lic ly av a ila b le o r a s c e rt a in a b le . A Y R C om po si t i on , Inc. v. R osenb erg , 619 A . 2d 592, 597 ( N . J . Super . C t . A pp. D i v. 1993) . C us t om erl i s t s of non- s ervi ce bus i nes s es m ayal s o be pr opr i et aryi nform at i on i f the l i s t s cont ai n i nform at i on thati s not pu bli cl yavail able and the com pan yprot ect s such i nfo rm at i on w i th restri ct i ve co ven ants , s u c h a s c o n f

id e n tia lity a g re e m e n ts o r c o v e n a n ts n o t to c o m p e te . P lat i num M gm t . , I nc. v. Da h ms , 666 A . 2d 1028, 1038 ( N . J . Super . C t . L aw D i v. 1995)
. H er e, T ar getw as noti n a s ervi ce bus i nes s ; r ather , i ts ol d pl as t i c bags . I nform at i on aboutthe s al e of pl as t i c bags i s publ i cl yavai l abl e, and Tar getdi d nots eek t o pr ot ect i nform at i on conce r ni ng i t s cus t om er s thr ough r es tr i ct i ve cove nant s i n i t s empl oym ent co n tr ac ts. A cc o rdin g ly , w e h o ld tha t T arg et’s cu stom er li sts w ere n o t pro p ri etary i nform at i on and, cons equent l y , notas s et s of the bankrupt cyes t at e. B . D u ty o f L o y a lt y E ven though none of the empl oy ees had s i gned r es tr i ct i ve cove nant s or confi dent i al i tyagr eement s , theynonethel es s ow ed a c om m on l aw dutyof l oy al tyt o T ar get6

w h ile e m p lo y e d th e re . S e e L a m o rte , 770 A . 2d at1168. T hi s dutyr equi r ed the Tri - C or defe nd ants , w hil e em ploy ed at Ta rget , t o refrai n from com peti ng w i th T argetor ot herw i se a c tin g c o n tr a ry to T a rg e t’ s in te re s t. S e e id
. T he B ankrupt cyC our tfound thatthe Trus t ee ha d al r eadycl os ed Tar getand t erm i nat ed i t s empl oy ees bythe t i m e Tri - C orw as form ed and the Tri - C ordefe ndant s began to so licit T a rg e t’s c u sto m e rs. W h ile th e B a n k ru p tcy C o u rt c o n sid e re d e v id e n c e th a t th e T riC o r d e f e n d a n ts h a d p re p a re d f

o r th is tra n sitio n p rio r to th e ir ter m in a tio n , itc o n c lu d e d th is e v id e n c e d id n o t in d ic a te th a t th e yw e re in a n yw a yd is lo y a l to T a rg e t w h ile e m p lo y e d th e re . Si m i l ar l y , even though Z i m m erm ann w as an off i cerof Tar getw hen i tfi l ed for bankrupt cy , the B ankrupt cyC our tfound thathe had be en di s pl ace d fr om hi s r es pons i bi l i t i es w hen the Trus t ee w as appoi nt ed. T her efor e, atthe t i m e of hi s al l eged mi s conduct , he w as notan off

i ceroran “i ns i der ” forpurpos es of fr audul entconvey ance l i abi l i ty , under11 U . S. C . § 548. F o x h as o ff

ere d n o co m p ell ing ev iden ce to co n v ince u s tha t th e B an k rup tcyC o u rt ’s fin d ing s o f f

ac t w ere clea rl yerro n eo u s. W e, th ere fo re, ho ld tha t th e T ri -C o r de fe n d an ts are notl i abl e forbr eac h of dutyof l oy al tyand thatZ i m m erm ann i s notl i abl e forbr eac h of fi duci arydut i es orforfr audul entconvey ance . C . T ort i ous I nt erf

ere nce B eca us e the Tri - C ordefe ndant s nei therm i s appr opr i at ed Tar get ’ s as s et s norbr eac hed anydut i es ow ed t o T ar get , w e agr ee w i th the B ankrupt cyC our tthati tw as noti m pr operfor7

the Tri - C ordefe ndant s t o cont actT ar get ’ s cus t om er s . A ccor di ngl y , w e fi nd thatthe Tri - C or d e f e n d a n ts d id n o t to rt io u s ly in te rf e re w ith T a rg e t’ s c o n tr a c tu a l r e la tio n s . See Pri nt i ng Mar t - Mor r is t ow n v. Shar p E l ecs . C or

p. , 563 A . 2d 31, 36 ( N . J . 1989) ( hol di ng thatt or t i ous i nt er fer ence w i th contr actual r el at i ons r equi r es a “l ur i ng aw ay , bydevi ous , i m pr operand u n ri g h te o u s m e a n s , o f

th e c u s to m e r o f

a n o th e r” ) ( in te rn a l q u o ta tio n m a rk s o m itte d ). D . U nfai r B usi nes s P ract i ces Fi nal l y , the B ankrupt cyC our tfound thatthe Tri - C ordefe ndant s fai l ed t o pr es ent s uffi ci entevi dence t o s uppor tthei rcount er cl ai m s forunfai rbus i nes s pr act i ces . T he Tri - C or d e f e n d a n ts c o n ten d th a t tw o lette rs f ro m F o x to T ri-C o r c u sto m e rs s u p p o rt th e ir count er cl ai m s . T hes e l ett er s al ert ed Tri - C or ’ s cus t om er s t o thi s pendi ng act i on and t o the p o ss ib ili tyth a t T ri-C o r c o u ld b e e n jo in e d f ro m d o in g b u sin e ss w ith th e m . W e a g re e w ith the B ankrupt cyC our tthatnothi ng i n thes e l ett er s i s act i onabl e. III . C oncl usi on F o r th e re a so n s d isc u ss e d a b o v e , w e w ill a f f irm th e ju d g m e n t o f

th e D istric t C o u rt, dis m i ssi ng the clai m s and co un t ercl ai m s.