2010 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

7-8-2010

In Re Target Ind Inc

Precedential or Non-Precedential: Non-Precedential

Docket No. 09-3343

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Recommended Citation

"In Re Target Ind Inc " (2010). 2010 Decisions. Paper 987.

http://digitalcommons.law.villanova.edu/thirdcircuit_2010/987
 NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

 

Nos. 09-3343/3344

 

IN RE: TARGET INDUSTRIES, INC. and LANCE PLASTICS, INC.,

 Debtors

THOMAS F. FOX and ROBERT B. WASSERMAN, CHAPTER 11 TRUSTEE FOR

TARGET INDUSTRIES, INC. and LANCE PLASTICS, INC.

v.

MARTIN GOZ, SR.; MARTIN GOZ, JR.; TARGET INDUSTRIAL PKG., INC.; 

TRI-COR CORPORATION; GLENN PIERSON; GUY ZIMMERMANN; ROBERT

GOLDSTEIN; JEFFREY FRAWLEY; MICHAEL GRASSMAN; SHAWN HILLING;

DENNIS PETREY; WILLIAM TROTTA; NEXUS PLASTCS, INC.; DONALD MERWIN;

ALFRED TEO; POLY PLASTICS PRODUCTS, INC.; BETA PLASTICS

CORPORATION; STEVEN REDLICH; ROBERT GOZ; ARLENE GOZ; DONNA

ZIMMERMANN; KIM PIERSON; GOZMAN, INC., d/b/a PLASTICS BAG OUTLET;

ABC COMPANIES, 1-20, said names being fictitious, JOHN DOES 1 -20, said names

being fictitious, and JANE DOE 1-20, said names being fictitious

THOMAS F. FOX; TARGET HOLDINGS, INC., TARGET INDUSTRIES, INC. and

ROBERT B. WASSERMAN, CHAPTER 11 TRUSTEE FOR TARGET INDUSTRIES,

INC. and LANCE PLASTICS, INC.

v.

TIFFANY PACKAGING; SHAREN WILMS, a/k/a SHAREN BACCARELLA; MARTIN

GOZ, SR.; MARTIN GOZ, JR.; TARGET INDUSTRIAL PKG.; TRI-COR

CORPORATION; GLENN PIERSON; GUY ZIMMERMANN; ARLENE GOZ; RITA

GOZ; ANGELA PFEIFER; GOZMAN, INC. d/b/a PLASTIC BAG OUTLET; 

ABC COMPANIES 1-20, said names being fictitious, JOHN DOES 1-20, said names being

fictitious, and JANE DOES 1- 20, said names being fictitious
2

Thomas F. Fox; Robert B. Wasserman, Chapter 11 Trustee for Target Industries, Inc., and

Lance Plastics, Inc.; Target Holdings, Inc., Target Industries, Inc., and 

Lance Plastics, Inc.

 Appellants in 09-3343. 

Tri-Cor Corporation ; Donna Zimmermann; Guy Zimmermann; Jeffrey T. Frawley;

Michael Grassman; Shawn Hilling; Dennis Petrey, 

 Appellants in 09-3344

 

On Appeal from the United States District Court

for the District of New Jersey

(D. C. No. 3-09-cv-00037)

District Judge: Honorable Anne E. Thompson

 

Submitted under Third Circuit LAR 34.1(a)

on May 14, 2010

Before: BARRY and ROTH, Circuit Judges

 and DALZELL*, District Judge

(Opinion filed: July 8, 2010)

 

 O P I N I O N 

 

ROTH, Circuit Judge:

Appellants Thomas Fox and Robert Wasserman, as trustee for Target Industries, Inc.,

and Lance Plastics, Inc., and Cross-Appellants Martin Goz, Sr., et al., appeal the District

Court’s affirmance of the Bankruptcy Court’s order dismissing their claims and 

 

*Honorable Stewart Dalzell, United States District Judge for the Eastern District of

Pennsylvania, sitting by designation. 
 The Bankruptcy Court had jurisdiction over the adversary proceeding under 28 U.S.C. 1

§§ 157 and 1334, and the District Court had jurisdiction to review the Bankruptcy Court's

final order under 28 U.S.C. § 158(a)(1). We have jurisdiction under 28 U.S.C. §§ 158(d)

and 1291. “We exercise plenary review of the District Court's conclusions of law. Since

the District Court sat as an appellate court to review the Bankruptcy Court, we review the

Bankruptcy Court's legal determinations de novo, its factual findings for clear error, and

its exercises of discretion for abuse thereof.” In re Tower Air, Inc., 397 F.3d 191, 195 (3d

Cir. 2005) (internal citations and quotation marks omitted).

 Fox pursued sixteen causes of action against all the Tri-Cor defendants and two 2

against Zimmermann individually. The sixteen causes of action were as follows: 

misappropriation of assets and proprietary information, breach of contract, conspiracy,

breach of loyalty and confidentiality, breach of covenant of good faith and fair dealing,

unfair competition, tortious interference with contractual relations, conversion, fraud,

civil RICO, piercing the corporate veil, and several bankruptcy causes of action. The two

causes of action pursued against Zimmermann were for breach of fiduciary duties and for

fraudulent transfer.

3

counterclaims. For the reasons discussed below, we will affirm.1

I. Introduction

Thomas Fox bought the assets of the consolidated bankruptcy estate of Target and

Lance, New Jersey corporations in the business of distributing and manufacturing plastic

bags. Fox, along with the Trustee of the bankruptcy estate, then commenced an adversary

proceeding in the Bankruptcy Court against former Target personnel who had left to work

for a competitor, Tri-Cor Corporation. Tri-Cor was owned by a former Target Officer, Guy

Zimmermann. Fox sought damages from these former employees and Zimmermann

(collectively, the Tri-Cor defendants), alleging various business torts, including the

misappropriation of Target’s customer lists, tortious interference with contractual relations,

and breach of duty of loyalty. The defendants counterclaimed, alleging that Fox had 2
 The Tri-Cor defendants’ counterclaims were for unfair competition, antitrust 3

violations, Lanham Act violations, tortious interference with contractual relations,

conversion, and defamation.

 Specifically, the judge dismissed the civil RICO count and the counts alleging breach

4

of contract and breach of the covenant of good faith and fair dealing, except as to those

defendants having employment contracts or commission agreements.

4

attempted to scare former Target clients from doing business with Tri-Cor.3

After both parties moved for summary judgment, the Bankruptcy Judge dismissed

three counts in the complaint, but otherwise denied the motions. Following an unsuccessful 4

interlocutory appeal of this order, the case was remanded to the Bankruptcy Court, this time

before another judge. This judge conducted a 14-day trial, at the end of which he dismissed

every claim in the proceedings. The District Court affirmed the Bankruptcy Court order,

adopting its reasoning and analysis.

On appeal to this Court, Fox contends that the Bankruptcy Court erroneously

determined that (1) Target’s customer lists were neither proprietary information nor property

of the estate, (2) the Tri-Cor defendants did not breach any duty of loyalty to Target, (3)

Zimmermann did not breach any fiduciary duties to Target and was not liable for fraudulent

conveyances under 11 U.S.C. §§ 544(b)and 548, and (4) the Tri-Cor defendants did not

tortiously interfere with Target’s contractual relations. The Tri-Cor defendants, in turn,

allege that the Bankruptcy Court erred in finding that there was insufficient evidence to

support their counterclaims.
5

II. Discussion

A. Proprietary Information

As the Bankruptcy Court found, customer lists may be proprietary information under

New Jersey law, depending on the nature of the business and the restrictions placed on

employees. Lamorte Burns & Co. v. Walters, 770 A.2d 1158, 1166 (N.J. 2001). Customer

lists of service businesses receive special protection because the names and addresses of

customers are not publicly available or ascertainable. AYR Composition, Inc. v. Rosenberg,

619 A.2d 592, 597 (N.J. Super. Ct. App. Div. 1993). Customer lists of non-service

businesses may also be proprietary information if the lists contain information that is not

publicly available and the company protects such information with restrictive covenants,

such as confidentiality agreements or covenants not to compete. Platinum Mgmt., Inc. v.

Dahms, 666 A.2d 1028, 1038 (N.J. Super. Ct. Law Div. 1995).

Here, Target was not in a service business; rather, it sold plastic bags. Information

about the sale of plastic bags is publicly available, and Target did not seek to protect

information concerning its customers through restrictive covenants in its employment

contracts. Accordingly, we hold that Target’s customer lists were not proprietary

information and, consequently, not assets of the bankruptcy estate.

B. Duty of Loyalty

Even though none of the employees had signed restrictive covenants or

confidentiality agreements, they nonetheless owed a common law duty of loyalty to Target
6

while employed there. See Lamorte, 770 A.2d at 1168. This duty required the Tri-Cor

defendants, while employed at Target, to refrain from competing with Target or otherwise

acting contrary to Target’s interest. See id. 

The Bankruptcy Court found that the Trustee had already closed Target and

terminated its employees by the time Tri-Cor was formed and the Tri-Cor defendants began

to solicit Target’s customers. While the Bankruptcy Court considered evidence that the TriCor defendants had prepared for this transition prior to their termination, it concluded this

evidence did not indicate that they were in any way disloyal to Target while employed there. 

Similarly, even though Zimmermann was an officer of Target when it filed for

bankruptcy, the Bankruptcy Court found that he had been displaced from his responsibilities

when the Trustee was appointed. Therefore, at the time of his alleged misconduct, he was

not an officer or an “insider” for purposes of fraudulent conveyance liability, under 11

U.S.C. § 548.

Fox has offered no compelling evidence to convince us that the Bankruptcy Court’s

findings of fact were clearly erroneous. We, therefore, hold that the Tri-Cor defendants are

not liable for breach of duty of loyalty and that Zimmermann is not liable for breach of

fiduciary duties or for fraudulent conveyance.

C. Tortious Interference

Because the Tri-Cor defendants neither misappropriated Target’s assets nor breached

any duties owed to Target, we agree with the Bankruptcy Court that it was not improper for
7

the Tri-Cor defendants to contact Target’s customers. Accordingly, we find that the Tri-Cor

defendants did not tortiously interfere with Target’s contractual relations. See Printing

Mart-Morristown v. Sharp Elecs. Corp., 563 A.2d 31, 36 (N.J. 1989) (holding that tortious

interference with contractual relations requires a “luring away, by devious, improper and

unrighteous means, of the customer of another”) (internal quotation marks omitted). 

D. Unfair Business Practices

Finally, the Bankruptcy Court found that the Tri-Cor defendants failed to present

sufficient evidence to support their counterclaims for unfair business practices. The Tri-Cor

defendants contend that two letters from Fox to Tri-Cor customers support their

counterclaims. These letters alerted Tri-Cor’s customers to this pending action and to the

possibility that Tri-Cor could be enjoined from doing business with them. We agree with

the Bankruptcy Court that nothing in these letters is actionable.

III. Conclusion

For the reasons discussed above, we will affirm the judgment of the District Court,

dismissing the claims and counterclaims.