Court Opinion

ID: 4684415
Source: CourtListenerOpinion
Date Created: 2021-05-06 14:10:18.751108+00
Date Added: 2024-06-11T08:04:21.368519
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE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.

                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-4058-19

DEERFIELD DISTRIBUTING,
INC., and PROTECT &
CONTROL, INC.,

          Plaintiffs-Appellants,

v.

JEFFREY D. GRATZ, MARC
GRATZ, and ANIXTER INC.,

     Defendants-Respondents.
___________________________

                   Submitted April 20, 2021 – Decided May 6, 2021

                   Before Judges Fisher and Gummer.

                   On appeal from the Superior Court of New Jersey,
                   Chancery Division, Bergen County, Docket No.
                   C-000280-18.

                   Meyner and Landis, LLP, attorneys for appellants
                   (Scott T. McCleary and Catherine Pastrikos Kelly, on
                   the briefs).

                   Thompson Hine, LLP, attorneys for respondents
                   (Rebecca Brazzano, on the brief).
PER CURIAM

      In this appeal, plaintiffs argue the trial judge erred – after a five-day bench

trial – in, among other things: determining a restrictive covenant contained in a

confidentiality agreement signed by the individual defendants – plaintiffs'

former employees – was unenforceable; finding the individual defendants did

not violate the confidentiality agreement; and rejecting the claim that the

individual defendants and their new employer conspired to breach the

agreement. We find no merit in plaintiffs' arguments and affirm.

      The evidence adduced at trial revealed plaintiff Deerfield Distributing,

Inc. is a wholesale distribution business formed in 1987. Fourteen years later,

to "isolate [Deerfield's] security business and to put in place an incentive

arrangement for Nick Scarane," who ran Deerfield's day-to-day operations and

managed its sales force, plaintiff Protect & Control, Inc. (also known as eDist)

was formed to engage in the distribution of security products.

      Defendant Marc Gratz had worked with Scarane at another business

similar to eDist in the 1990's. Marc left that business in May 2000 and joined

eDist because Scarane was there employed. Defendant Jeffrey Gratz, like his

brother Marc, had worked in the security distribution business for more than

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thirty years when he too left his then employer and began working for eDist in

December 2001.

      The Gratz brothers did not sign confidentiality or restrictive covenant

agreements when first employed by eDist; they were, however, asked to do so

in 2011 or else face termination from their employment. In November 2011,

both brothers executed agreements containing promises not to "use, disclose or

publish any Confidential Information [1] to anyone outside the Company, [2] either

during or subsequent to [their] employment[.]" The agreement also contained

their promise that "[d]uring and for the two-year period" following the

termination of their employment, they would not:

               • "directly or indirectly . . . induce or attempt to
                 induce . . . any employee, consultant, referral
                 source or agent of the Company . . . to alter or

1
  "Confidential Information" was defined in the agreement as any of plaintiffs'
"proprietary information, technical data, trade secrets or know how, including,
but not limited to, research, product plans, products services, customer lists and
customers of the Company (including but not limited to, customers of the
Company on whom [the signator] called or with whom [the signator] became
acquainted during the term of [the signator's] employment)." Another provision
of the agreement stated that confidential information "does not include any of
[those items described immediately above] that have become publicly known
and made generally available through no wrongful act of [the signator's] or of
others who were under confidentiality obligations as to the item or items
involved."
2
  "Company" was defined as "Deerfield Distributing, Inc. t/a eDist, its
subsidiaries, affiliates, successors and assigns."
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                                        3
                    terminate their employment or other relationship
                    with the Company"; or

                 • "solicit or conduct business with, any of the
                   Company's clients [3] or referral sources for the
                   purpose of inducing them to do business with any
                   person or entity other than the Company in the
                   Company's Market Area [4] with regard to the
                   purchase of competing services as determined by
                   the Company in its sole discretion."

        In May 2017, eDist's national sales manager resigned, and Scarane

resigned two months later.       Scarane was replaced by someone without

experience in the security industry.

        A month after Scarane departed, Jeffrey Gratz was approached by a

regional manager of defendant Anixter, Inc. – an eDist competitor – about a

sales position with Anixter.     The discussions expanded, and both brothers

expressed an interest in leaving eDist and joining Anixter. Marc Gratz provided

Anixter with a copy of the confidentiality agreement, prompting Anixter to make

separate and independent offers to both brothers; Anixter also instructed them

"not to disclose or otherwise use any of eDist's confidential or proprieta ry

3
 The agreement defines a Company client as "any person or entity that the
Company provided services to during the term of [the signator's] employment
with the Company or, if longer, during the thirty-six (36) months prior to the
date of [the signator's] last day of employment with the Company."
4
    The agreement defines this "Market Area" as North America.
                                                                         A-4058-19
                                        4
information" or attempt to recruit or solicit any eDist employees. In addition,

the brothers were directed not to solicit the business of customers they dealt with

while at eDist, although Anixter noted that "if customers – of their own volition

– choose to do business with Anixter, that is, of course, the customers[']

prerogative." Anixter's official offers of employment were extended to the Gratz

brothers in early December 2017. They both accepted, resigned from eDist, and

began working for Anixter on January 15, 2018.

      In October 2018, plaintiffs commenced this action, alleging the Gratz

brothers breached the confidentiality agreement and the terms of the restrictive

covenant, as well as the implied covenant of good faith and fair dealing and their

common law duty of loyalty. Plaintiffs alleged the brothers committed fraud

and made fraudulent misrepresentations; their complaint also included claims

against the Gratz brothers and Anixter together, alleging the misappropriation

of trade secrets, unfair competition, and civil conspiracy, and a count against

Anixter alone for tortious interference.

      At the outset, the judge entered an order to show cause, denying plaintiffs'

request for immediate temporary restraints. In January 2019, the judge denied

plaintiffs' request for a preliminary injunction, and motions for summary

judgment were denied later in the litigation.

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                                           5
      During a bench trial that took place on October 29 and 30, and December

10, 17 and 18, 2019, the judge heard testimony from both sides regarding the

claims that: (1) defendants solicited and conducted business in violation of the

confidentiality agreements; (2) defendants made use of eDist's confidential

information; (3) the Gratz brothers attempted to induce eDist employees to

resign; (4) the Gratz brothers encouraged eDist to renew a lease for a business

location knowing they would soon depart; and (5) Anixter sanctioned and

assisted the Gratz brothers activities in soliciting business and using eDist's

confidential information. The trial judge determined that the confidentiality

agreement was "overly broad" because it was not limited to customers with

whom the Gratz brothers did business nor to the territory they covered. The

judge also found that eDist impermissibly sought to insulate any person or entity

with whom it had provided services during the Gratz brothers' employment, and

beyond, throughout all North America. For these and other reasons, the judge

found the confidentiality agreement and its restrictive covenant to be

unenforceable. Moreover, the judge determined there was no solicitation of

business inconsistent with the confidentiality agreement. Instead, as the judge

noted in his opinion, defendants' approach was epitomized by the step Jeffrey

Gratz took in updating his Facebook page to publicly advise of his change of

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                                       6
employment that allowed customers to reach out to him rather than the other

way around. The judge referred to the "telling" example of one customer who

replied to Jeffrey Gratz, "Honestly, I'll follow you . . . . I have no allegiance to

eDist, my allegiance is with you." The judge provided thorough findings in his

written opinion, rejecting plaintiffs' other alleged causes of action. Judgment

was entered in defendants' favor.

      Plaintiffs appeal, arguing:

            I. THE TRIAL COURT COMMITTED REVERSIBLE
            ERROR WHEN IT FAILED TO ENFORCE THE
            AGREEMENT'S RESTRICTIVE COVENANTS.

                   A. Standard of Review

                   B. The Agreement is Enforceable as
                   Written.

                   C. Plaintiffs Proved by a Preponderance of
                   the Evidence that [the Gratz brothers]
                   Violated the Agreement. [5]

            II. THE TRIAL COURT COMMITTED REVERSIBLE
            ERROR BY DISMISSING PLAINTIFFS' CLAIM FOR
            MISAPPROPRIATION OF TRADE SECRETS.

            III. THE TRIAL COURT COMMITTED REVER-
            SIBLE ERROR BY DISMISSING PLAINTIFFS'
            CLAIM     FOR   TORTIOUS INTERFERENCE
            AGAINST ANIXTER.

5
 We have eliminated for brevity's sake the subsections of sections B and C of
plaintiffs' Point I and those subsumed in Point VIII.
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                                         7
            IV. THE TRIAL COURT COMMITTED REVER-
            SIBLE ERROR BY DISMISSING PLAINTIFFS'
            CLAIMS    FOR   CONSPIRACY   AGAINST
            DEFENDANTS FOR STEALING PLAINTIFFS'
            CUSTOMERS.

            V. THE TRIAL COURT COMMITTED REVERSIBLE
            ERROR BY DISMISSING PLAINTIFFS' CLAIMS
            FOR FRAUD AND FRAUDULENT MISREPRE-
            SENTATION AGAINST [THE GRATZ BROTHERS]
            BASED ON THE PURPORTED ABSENCE OF A
            MATERIAL MISREPRESENTATION.

            VI. THE TRIAL COURT COMMITTED REVER-
            SIBLE ERROR BY DISMISSING PLAINTIFFS'
            CLAIM AGAINST [THE GRATZ BROTHERS] FOR
            BREACHING THEIR DUTY OF LOYALTY.

            VII. THE TRIAL COURT COMMITTED REVER-
            SIBLE ERROR BY DISMISSING PLAINTIFFS'
            CLAIM AGAINST DEFENDANTS FOR UNFAIR
            COMPETITION.

            VIII. THE TRIAL COURT COMMITTED REVER-
            SIBLE ERROR BY FINDING THAT PLAINTIFFS
            FAILED TO PROVE DAMAGES [AND THE TRIAL
            COURT]     SHOULD    [HAVE]  REJECT[ED]
            DEFENDANTS' EXPERT REBUTTAL.

            IX. THE TRIAL COURT COMMITTED REVER-
            SIBLE ERROR WHEN IT DENIED PLAINTIFFS'
            MOTION TO AMEND ITS COMPLAINT.

We find insufficient merit in these arguments to warrant further discussion in a

written opinion. R. 2:11-3(e)(1)(E).

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      We add only, with regard to plaintiffs' first eight points, that the judge's

findings of fact deserve our deference because they are grounded in the evidence

and testimony the judge found credible and persuasive, Rova Farms Resort, Inc.

v. Inv. Ins. Co., 65 N.J. 474, 483-84 (1974), and that the conclusions the judge

drew from those findings are well reasoned and based on established legal and

equitable principles, Griepenburg v. Twp. of Ocean, 220 N.J. 239, 254 (2015).

We, therefore, affirm substantially for the reasons set forth in Judge James J.

DeLuca's comprehensive and well-reasoned written decision.

      In their ninth point, plaintiffs contend that the judge abused his discretion

in denying their August 2019 request to amend the complaint to add a claim that

defendants "negligently caus[ed] economic loss."        Judge DeLuca correctly

recognized this was merely a new theory; his "letter order" stated that

"[p]laintiffs readily concede that the proposed amendment is not based upon any

new evidence or discovery." He noted the expiration of the time to amend and

the time for fact depositions, and that the deadline for submitting expert reports

was days away. Moreover, the judge determined that plaintiffs had not provided

a "legitimate reason why they delayed in raising this claim" and that to allow

the amendment would cause a delay in an "already contentious proceeding."

Judge DeLuca later denied plaintiffs' motion for reconsideration, further

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                                        9
amplifying on the basis for his earlier denial. We find no abuse of discretion.

As the judge correctly recognized, the amendment "would have a prejudicial

effect on the [d]efendants in terms of delay, expense[,] and their ability to

prepare and meet such a claim." We find no abuse of discretion in the judge's

disposition of plaintiffs' last-minute request for an amendment. See Du-Wel

Prods., Inc. v. U.S. Fire Ins. Co., 236 N.J. Super. 349, 364 (App. Div. 1989)

(upholding the exercise of a judge's discretion to refuse a late amendment "at a

point at which the rights of other parties to a modicum of expedition will be

prejudicially affected"); see also Nielsen v. Wal-Mart Store No. 2171, 429 N.J.

Super. 251, 256 (App. Div. 2013); Bldg. Materials Corp. of Am. v. Allstate Ins.

Co., 424 N.J. Super. 448, 484 (App. Div. 2012).

      Affirmed.

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