Opinion
CIVIL ACTION NO. 98-5627 (JEI).
November 10, 1999.
OBERMAYER, REBMANN, MAXWELL HIPPEL, By: GREGORY D. SAPUTELLI, Haddonfield, N.J., Attorney for plaintiff.
SAUL, EWING, REMICK SAUL, By: WILLIAM a. DESTEFANO, Philadelphia, PA., Attorney for defendants The Lambert Group, et al.
ROSSI, BARRY, CORRADO, GRASSI RADELL, By: FRANK L. CORRADO, Wildwood, N.J., Attorney for defendant Douglas Hunsberger.
OPINION
Presently before the Court is defendants', The Lambert Group, Inc., Marian Lambert, Marc Lambert, and Christian Lambert, motion for summary judgment. For the reasons set forth below, defendants' motion is granted in part and denied in part. Also before the Court is defendant Douglas Hunsberger's motion for summary judgment. For the reasons set forth below, in section II of this opinion, this motion is granted in its entirety.
FACTS
Prior to October of 1988, Marian Lambert and her husband Louis Lambert, owned and operated "M. Lambert Travel Services, Inc.," a New Jersey corporation which organized bus tours for senior citizens. In October of 1988, shortly after her husband's death, Marian Lambert sold M. Lambert Travel Services to Richard Adelizzi, the owner of Suncoast Tours, Inc. Five thousand dollars of the total purchase price was allocated to a restrictive covenant whereby Marian and her son Marc agreed not to start another bus tour business for a period of ten years. As part of the sales contract, Marian Lambert agreed to work for Suncoast for "a limited period of time" in order to aid in the transition of her former customers to Suncoast Tours, Inc. (Defendant's Exhibit A, 3).
In December of 1988, Adelizzi registered the fictitious name "Lambert Travel" with the State of New Jersey and Suncoast Tours, Inc., began doing business as "Suncoast Tours/Lambert Travel Co." (hereafter "Suncoast/Lambert"). Marian Lambert was employed by Suncoast/Lambert from October, 1988, until she resigned in early November, 1998. In November of 1998, Ms. Lambert and her two sons, Marc and Christian Lambert, started a new bus tour company for senior citizens and began conducting business as "The Lambert Group."
In December of 1998, plaintiff brought the instant action before this Court and sought a preliminary injunction to prevent defendants from operating under the name "The Lambert Group." Plaintiff claimed that defendants' use of the Lambert name violated the Lanham Act and New Jersey's unfair competition laws because it was likely to confuse Suncoast/Lambert customers. Plaintiff further alleged that Mrs. Lambert had misappropriated trade secret information from Suncoast/Lambert including: a list of prospective customers, a draft copy of an upcoming brochure, and price information from potential vendors know as "cost buildups."
On December 22, 1998, this Court granted plaintiff's request for a preliminary injunction and ordered defendants to stop using the name "The Lambert Group." The Court also ordered defendants to destroy any documents containing the name "The Lambert Group." In addition, defendants were ordered to return any copies of the Suncoast/Lambert customer lists which they had in their possession. Defendants have since abandoned the "Lambert" trade name and have changed their company name to "Senior Excursions, Inc."
STANDARD
"[S]ummary judgment is proper `if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed.R.Civ.P. 56(c)).
In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party.Pollock v. American Tel. Tel. Long Lines, 794 F.2d 860, 864 (3d Cir. 1986). The role of the court is not "to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
DISCUSSION
I. Defendants', The Lambert Group, Marian Lambert, Marc Lambert, and Christian Lambert, Motion for Summary Judgment
A. Trade Name Infringement
In count I of the complaint, plaintiff charges defendants, The Lambert Group, Marian Lambert, Marc Lambert, and Christian Lambert (hereafter "Lambert defendants" or "defendants") with trade name infringement in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1). In count III plaintiff charges defendants with common law trade name infringement and in count IV plaintiff charges defendants with trade name infringement under the New Jersey Fair Trade Act, N.J.S.A. 56:4-1 et seq. Because a violation of the Lanham Act is also a violation of the New Jersey common law and the New Jersey Fair Trade Act, the Court will analyze these claims under the framework used to analyze Lanham Act claims. See Am. Tel. and Tel. Co. v. Winback and Conserve Program, Inc., 42 F.3d 1421, 1433 (3d Cir. 1994) (holding that because the test for common law unfair competition claims under New Jersey common law is essentially the same as the test under the federal Lanham Act, a separate analysis is not required); see also Apollo Distributing Co. v. Jerry Kurtz Carpet Co., 696 F. Supp. 140, 143 (holding that a violation of section 43(a) of the Lanham Act is also a violation of the New Jersey Fair Trade Act).
"Trade names are symbols used to distinguish companies, partnerships and businesses. Trade names symbolize the reputation of a business as a whole. In contrast, trademarks and service marks are designed to identify and distinguish a company's goods and services. The major legal distinction between trademarks and trade names is that trade names cannot be registered." Country Floors, Inc. v. Gepner , 930 F.2d 1056, 1064 n. 2 (3d Cir. 1991). Although the majority of claims brought under the Lanham Act are claims of trademark infringement, analogous claims of trade name infringement may be brought under the Act, 15 U.S.C. § 1125(a)(1) . Id .
Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), imposes civil liability upon one who makes a false or misleading representation of fact that is "likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities."
To prove trade name infringement, plaintiff must show that: (1) its trade name is distinctive and therefore, protectable; and (2) defendants' actions caused a likelihood of confusion among the relevant consumers.See Birthright v. Birthright, 827 F. Supp. 1114, 1136 (D.N.J. 1997) (quoting Dominion Banskshares Corp. v. Devon Holding Co., Inc., 690 F. Supp. 338, 344 (E.D.Pa. 1988)).
In the instant case, defendants do not dispute that the "Lambert" name is distinctive and protectable or that the name is lawfully owned by Suncoast/Lambert. Rather, defendants argue that any confusion created by their brief use of the Lambert name was remedied before plaintiff suffered actual damages. Shortly after the Court's Order of December 22, 1998, defendants changed their company name to "Senior Excursions, Inc." Defendants sent a letter to an unspecified number of customers pointing out the name change. The letter was signed by Marian Lambert and stated, in relevant part:
AS MOST OF YOU KNOW, MY NEW COMPANY IS NOT IN ANY WAY AFFILIATED WITH SUNCOAST/LAMBERT TOURS. HOWEVER, IN ORDER TO MAKE THIS ABSOLUTELY CLEAR TO EVERYONE, I HAVE CHANGED THE NAME OF MY COMPANY TO SENIOR ADVENTURES, INC.
IF BY CHANCE, YOU TENTATIVELY BOOKED WITH ME THINKING THAT I WAS STILL WITH SUNCOAST/LAMBERT TOURS OR IF YOU TENTATIVELY BOOKED WITH ME BUT INTENDED TO BOOK WITH SUNCOAST/LAMBERT, PLEASE LET ME KNOW AND I WILL GLADLY CANCEL YOUR RESERVATION.
(Defendants' Exhibit D) (emphasis in original).
Defendants note that plaintiff sent several similar letters to its customers explaining that Suncoast/Lambert was a separate entity from the Lambert Group and/or Senior Excursions. (See Defendants' Exhibit E). Plaintiff also called a list of prospective customers, known as the "hot prospects" list, in order to determine whether they had received a brochure from "The Lambert Group." (Defendants' Exhibit F, Dep. of R. Adelizzi, 292:11-15).
Defendants argue that these actions eliminated any confusion which might have existed as a result of their use of the Lambert name. According to defendants, "[i]t is inconceivable that after this barrage of information the relevant market of consumers would be confused about which company is which." (Defendants' memorandum, 8). In addition, defendants assert that all of these actions were taken before any bookings were finalized or deposit money was received, and therefore conclude that plaintiff did not suffer any damages.
Plaintiff argues that it is not dispositive that defendants did not receive any deposit checks prior to changing their name. Plaintiff maintains that by the time defendants changed their corporate name, they had already begun to establish recognition in the marketplace by using the Lambert trade name and taking advantage of Suncoast/Lambert's goodwill. As a result, plaintiff claims that: (1) it lost sales to defendants; (2) it was forced to make sales at lower prices to retain customers; (3) it experienced increased bulk buying costs; (4) it was forced to forfeit deposits paid to vendors; (5) it expended additional time, money and effort to maintain client goodwill; and (6) it was forced to bear the costs of the present litigation. (Plaintiff's opposition, 7).
The "linchpin" of a trade name infringement claim, like a trademark infringement claim, is a determination that defendants' actions are or were "likely to cause confusion." Matrix Essentials, Inc. v. Cosmetic Gallery, Inc., 870 F. Supp. 1237, 1251 (D.N.J. 1994) (quoting Matrix Essentials v. Emporium Drug Mart, Inc., 988 F.2d 587, 590) (5th Cir. 1993)). To survive a motion for summary judgment, plaintiff need not prove that defendants' actions actually caused confusion, only that they were likely to do so. Ford Motor Co. v. Summit Motor Products, Inc., 930 F.2d 277, 292 (3d Cir. 1991), cert. denied, 502 U.S. 939 (1991).
The burden on the plaintiff is less onerous when the goods or services at issue are in direct competition. "When the trademark owner and the alleged infringer deal in competing goods or services, the court need rarely look beyond the mark itself." Interspace Corp. v. Lapp, Inc., 721 F.2d 460, 462 (3d Cir. 1983). In contrast, where the goods or services are not competing, the similarity of the trademarks or trade names is just one of many factors the court must examine. Id. at 462-63.
It is not disputed that plaintiff and defendants offer competing services. Plaintiff and defendants offer a nearly identical service, bus tours, to the same relevant market, senior citizens living in southern New Jersey. Therefore, the relevant question for this Court is whether the similarity of the trade names "Lambert Travel Co." and "The Lambert Group" was likely to cause confusion among potential Suncoast/Lambert customers.
In order to be found likely to cause confusion, two trade names need not be identical, but only "confusingly similar." Country Floors v. Gepner, 930 F.2d 1056, 1063 (3d Cir. 1991). The task for this Court is to determine whether viewing the "overall impression of the marks, as a consumer normally would in the marketplace . . . it is likely that they would create confusion in the mind of an ordinary purchaser." American Cyanamid Co. v. Nutraceutical Corp., 54 F. Supp.2d 379, 387 (D.N.J. 1999) (citing Taj Mahal Enterprises v. Trump, 745 F. Supp. 240, 247 (D.N.J. 1990)).
Looking solely to the trade names themselves, there is little doubt that defendants' adoption of the name "The Lambert Group" was likely to cause confusion among potential customers. See, e.g., Country Floors, 930 F.2d at 1063 (holding that similarity between competing company logos "Country Floors" and "Country Tile" was in itself sufficient to raise a genuine factual dispute on plaintiffs Lanham Act claim). Here, defendants not only used a "confusingly similar" name, they marketed their services to many of the same customers that Marian Lambert had been in contact with as an employee of Suncoast/Lambert. Defendants produced two thousand brochures bearing the Lambert name, many of which were distributed prior to the December 22nd Court Order. Although "The Lambert Group" was a new company, the brochures thanked the customers for their "loyalty, support and help over the many, many years in the past." (Plaintiff's complaint, 69(a)). In addition, the brochure listed tour packages and price information that was nearly identical to those listed in Suncoast/Lambert's brochure, and stated that the brochure contained "most of our most popular destinations." (Plaintiff's complaint, 69(e)). The Court finds that an average consumer receiving this brochure might well be confused about the origin of the services advertised.
Plaintiff has included the affidavits of two Suncoast/Lambert customers who testified that they were confused by the "Lambert Group" brochure. (Plaintiff's Exhibits 12, 13). One affiant, Marie Baldwin, stated that after reading the "Lambert Group" brochure and cover letter, she concluded that they were from Suncoast/Lambert. She came to this conclusion because "the brochure appeared to be word for word the same as the trips I had booked with Suncoast Tours, Inc./Lambert Travel Co. in the past. All the details were the same." (Exhibit 13, ¶ 5). The other affiant, George Habeeb, stated that, after receiving the "Lambert Group" brochure, he concluded that Suncoast/Lambert "had been purchased, or was otherwise being operated by Ms. Lambert and `The Lambert Group,' and that Mr. Adelizzi was no longer in the business." (Exhibit 12, ¶ 10).
In deciding upon a motion for summary judgment in a trade name infringement dispute, a court looks to find "a minimum of similarity between the [trade names] before it will impanel a jury to pass upon the issue of whether a likelihood of confusion exists." American Cyanamid, 54 F. Supp.2d at 388. In this case, plaintiff has succeeded in meeting this threshold requirement.
Because plaintiff has succeeded in making out a prima facie case of trade name infringement, defendants' motion for summary judgment is denied.
As noted above, defendants argue that because letters were sent to many of Suncoast/Lambert's former customers explaining that "The Lambert Group" was not associated with Suncoast/Lambert before defendants accepted any deposits, no damage was actually suffered by plaintiff. This argument is not persuasive. First, accepting the facts in the light most favorable to plaintiff, the Court concludes that it is likely that a substantial amount of confusion continued to exist despite plaintiff's and defendants' best efforts. Second, defendants focus on one type of confusion when there are in fact "different levels of confusion." Resorts International, Inc. v. Greate Bay Hotel and Casino , 830 F. Supp. 826, 838 (D.N.J. 1992) In addition to "mistake" and "confusion as to source," there is "a third, and perhaps most significant, kind of confusion which is likely to work to plaintiff's detriment — that is, defendants' ability to gain a foothold in plaintiff's market by exploiting subliminal or unconscious association with plaintiff's well-known name." Id . (quoting Playboy Enterprises, Inc. v. Chuckleberry Pub., Inc . , 486 F. Supp. 414 (S.D.N.Y. 1980), aff'd , 687 F.2d 563 (2d Cir. 1982)). Plaintiff should have the opportunity to prove the likely existence of subliminal confusion and the diversion of customers that results from such confusion at trial. Id .
B. Plaintiff's Claims for "Bad Faith Damages"
Section 35 of the Lanham Act, 15 U.S.C. § 1117 provides:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, or a violation under section 43(a), shall have been established in any civil action arising under this Act, the plaintiff shall be entitled, subject to the provisions of sections 29 and 32 and subject to the principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action . . . The court in exceptional cases may award reasonable attorney fees to the prevailing party.
1. Profits
An accounting of profits is a form of equitable relief and does not follow automatically from a showing of trade name infringement.Williamson-Dickie Mfg. Co. v. Davis Mfg. Co., 251 F.2d 924, 926 (3d Cir. 1958). Before a court will order an accounting of defendants' profits, plaintiff must produce evidence that defendants acted willfully or in bad faith. Securacomm Consulting Inc. v. Securacom Inc., 166 F.3d 182, 187 (3d Cir. 1999) Willful infringement of another's trade name "consists of more than the accidental encroachment of another's rights. It involves an intent to infringe or a deliberate disregard of a holder's rights."Id.
Defendants argue that the Court cannot award plaintiff their profits under the Lanham Act or New Jersey law because they had no profits at the time they abandoned the Lambert name in December of 1998. In support of this argument, defendants note that they did not receive any deposit checks or book any tours prior to changing their name to Senior Excursions, Inc. Plaintiff argues that even if defendants did not book any tours or receive any deposits prior to the Court's injunction, defendants "had already gained an unfair advantage from the use of that name during the critical time of their entry into the market and close to 2,000 brochures were already circulating under that name, brochures from which tours were booked throughout 1999." (Plaintiff's opposition, 7).
Plaintiff's argument is persuasive. Although defendants operated as "The Lambert Group" for less than two months, they concede that over fifteen hundred brochures bearing the "Lambert Group" name were sent to prospective customers prior to the December 22nd injunction. (Defendants' statement of facts, ¶ 30). Defendants do not deny that they continued to solicit business from the recipients of these brochures, albeit under the name Senior Excursions, Inc., after the December 22nd injunction. There is, therefore, substantial evidence from which a rationale trier of fact could conclude that defendants profited from their use of plaintiff's trade name.
Defendants further argue that even if they did profit from the use of the Lambert trade name, they did not intend to do so or do so in bad faith. Defendants contend that they reasonably relied on the advice of their attorney, Marcus Karavan. In a certification attached to defendants' brief, Mr. Karavan stated that he contacted the New Jersey Secretary of State's Office in Trenton and found that "The Lambert Group, Inc." was available for the purposes of incorporating and doing business as a New Jersey Corporation. (See Defendants' Exhibit B) He allegedly advised Marc and Christian Lambert that they could lawfully incorporate and conduct business as "The Lambert Group, Inc." Id.
There is some question as to the veracity of this certification. Mr. Karavan stated that he spoke to Christian Lambert in the summer of 1998 about the legality of using the name "The Lambert Group, Inc." However, in a deposition conducted in March of 1999, Christian Lambert denied that he ever spoke to Mr. Karavan or any other attorney about the use of the Lambert Group name:
Q: Did you ever talk to a lawyer about the use of the name The Lambert Group?A: Are you referring to me personally? Q: You, personally. A: No, I didn't, no. (Plaintiff's Exhibit 35, 40).
In the instant case, the record is replete with evidence from which a reasonable juror could conclude that defendants acted in bad faith. This evidence is not negated by defendants' protestations that they acted "on the advice of counsel." See Bear U.S.A., Inc. v. A.J. Sheepskin Leather Outerwear, 909 F. Supp. 896, 907 (S.D.N.Y. 1995) (tenuous evidence of advice of counsel, combined with evidence strongly indicating bad faith, undermines defendants' claim of good faith).
Accepting the facts in the light most favorable to the plaintiff, defendants' actions in this case go beyond mere carelessness. As a ten year employee of Suncoast/Lambert, Marian Lambert was well aware that Suncoast/Lambert was using the Lambert trade name. Nevertheless, Marian Lambert and her son Marc sent out over fifteen hundred brochures bearing the Lambert name. Many of these brochures were sent to customers whom Marian previously had solicited business from on behalf of Suncoast/Lambert. In addition, the brochures contained nearly identical tour packages and price information and included language which suggested a connection between "The Lambert Group" and Suncoast/Lambert. Based on this evidence a reasonable juror could find that defendants made a "calculated attempt to benefit from [Suncoast/Lambert's] goodwill."Securacomm, 166 F.3d at 189.
2. Attorney's Fees
The Court has discretionary power to award attorney's fees to the prevailing party in a claim under the Lanham Act when "exceptional circumstances" exist. 15 U.S.C. § 1117(a). "Exceptional circumstances" have been defined to include "culpable conduct on the part of the losing party, such as bad faith, fraud, malice or knowing infringement." Ferrero U.S.A., Inc. v. Ozak Trading, Inc., 952 F.2d 44, 47 (3d Cir. 1991). For the reasons set forth above with regard to plaintiff's claim for defendants' profits, defendants' motion for summary judgment is denied. If at trial, the evidence indicates that defendants' actions were nothing more than a benign attempt to use their family name, the Court, in its discretion, may decline to award attorney's fees at that time.
C. Misappropriation of Trade Secrets
Plaintiff claims that defendants misappropriated three separate trade secrets: (1) a master list of customers (and the condensed "hot list" of customers), (2) a draft copy of plaintiff's 1999 brochure, and (3) a list of potential vendors and their prices known as "cost build-ups."
Under New Jersey law, there are five basic elements to a claim of trade secret misappropriation: "(1) the existence of a trade secret; (2) communicated in confidence by the plaintiff to the employee; (3) disclosed by the employee in breach of that confidence; (4) acquired by the competitor with knowledge of the breach of confidence, and (5) used by the competitor to the detriment of the plaintiff." Rohm and Haas Co. v. Adco Chem. Co., 689 F.2d 424, 429-30 (3d Cir. 1982) (citations omitted). In addition, New Jersey courts require that the plaintiff show that he took precautions to maintain the secrecy of the trade secret.Id. (citing Sun Dial Corp. v. Rideout, 108 A.2d 442, 447 (N.J.Sup.Ct. (1954)).
The first task for the Court is to determine whether the information allegedly misappropriated qualifies as a "trade secret." The definition of a "trade secret" was set forth by the Supreme Court of New Jersey inSun Dial: "A trade secret may consist of a plan, process, formula, device or compilation of information used in one's business and which affords an opportunity to obtain an advantage over competitors who do not know or use it." Sun Dial, 108 A.2d at 366 (quoting Restatement of Torts § 757 cmt. b (1939)).
Courts have cautioned that a straightforward application of the above definition is not always sufficient to determine whether something is a trade secret and have suggested several additional factors for consideration: (1) the extent to which the information is publicly known, (2) the extent to which it is known to employees and others involved in the business, (3) the extent of the measures used to guard its secrecy, (4) the value of the information, (5) the amount of effort or money expended in developing the information, and (6) the ease or difficulty with which the information could be acquired or duplicated.Trump Castle Assoc. v. Tallone, 645 A.2d 1207, 1208 n. 1 (N.J.Super.Ct. App. Div. 1994).
1. Master Customer List and the Hot Prospects List
Plaintiff claims that the master customer list was a confidential list of senior citizen group leaders who had done business with Suncoast/Lambert in the past and potential customers targeted for future solicitation. The list contained over twelve hundred names along with addresses and phone numbers. (Plaintiff's Exhibit 2, Affidavit of R. Adelizzi, ¶ 7-8). According to plaintiff, the list was developed through plaintiff's participation in trade shows, organization of luncheons, telephone calls and marketing efforts.
The hot prospects list is a subset of the master list. This list is compiled each Fall and is made up of customers who booked a tour with plaintiff in the past year or indicated an intention to book in the upcoming year. (Plaintiff's Exhibit 26, Dep. Of J. McGarry-Flynn, 34-35, 45). According to plaintiff, both the master list and hot prospects list are the result of substantial marketing efforts and neither is publicly available.
Under certain circumstances, a list of customers may constitute a trade secret. See Trump's Castle Assoc. v. Tallone, 645 A.2d at 1208 (citing Restatement of Torts § 757 (1939))("[a] trade secret can also relate to other aspects of business operations such as pricing and marketing techniques or the identity and requirements of customers"); AYR Composition, Inc. v. Rosenberg, 619 A.2d 592, 597 (N.J.Super.Ct. App. Div. 1993) (citing Abalene Extermination Co. v. Oser, 5 A.2d 379 (N.J.Super.Ct. Ch. Div. 1939))("Where a company's business is to provide services, information about customers is a property right of the company") (citations omitted). Defendants argue, however, that the hot prospects list is not a trade secret because it is not the product of unique skill or creativity, Suncoast/Lambert employees were not instructed to keep it confidential, and the information contained within it is available through public sources.
Defendants arguments are not persuasive. Although it may not have taken an enormous amount of effort to place the names of past customers onto the hot prospects list, certainly a great deal of effort was required to attract those customers to Suncoast/Lambert in the first place. Also, even if Suncoast/Lambert employees were not instructed to keep the list confidential, the list may still constitute a trade secret. Suncoast/Lambert is a small business and it would be reasonable for its owner, Richard Adelizzi, to rely on the discretion and common sense of his employees without a specific policy of confidentiality. See Sun Dial, 102 A.2d 90 ("[a]bsolute secrecy is not required, but rather that qualified secrecy which arises from mutual understanding and is required alike by good faith and good morals."); Merkle v. Johnson, 961 F. Supp. 721, 731 (D.N.J. 1997) ([i]t is not requisite that only the proprietor of the business know it. He may, without losing his protection communicate it to employees involved in its use.").
For example, Suncoast/Lambert periodically hosts luncheons to which potential customers are invited. (Plaintiff's Exhibit 26, Dep. of J. McGarry-Flynn, 31-32). During lunch Suncoast/Lambert employees distribute travel surveys to the customers. Id . After lunch, Suncoast/Lambert employees meet with the customers, discuss the survey responses and encourage them to book a tour with Suncoast/Lambert. Id .
At least one Suncoast/Lambert employee, Belle Oleferuk, testified that she was told to keep the hot list confidential. (Plaintiff's Exhibit 20, Dep. of B. Oleferuk, 34:2-19).
Richard Adelizzi testified that only he had regular access to the master customer list:
A: I'm the only person that has access to the computer. Everybody had a computer on their desk, but this computer is by itself. It is the only computer that has the list on it.. . . Q: This list is password protected?
A: Yes, it's password protected. Not only that, no one else knows how to get into that program.Q: They can't open the program without your assistance?
A: They could open it, but never know how to get to the names.(Plaintiff's Exhibit 7, Dep. of R. Adelizzi, 70:2-24).
Defendants are correct in asserting that matters of public knowledge or general knowledge within the industry cannot be protected as trade secrets. Apollo Technologies Corp. v. Centrosphere Industrial Corp., 805 F. Supp. 1157, 1198 (D.N.J. 1992). They argue that similar lists of senior citizen representatives can be purchased on the open-market or pieced together using the Yellow Pages and the internet. However, even if defendants could assemble a similar list of customers using public sources, it could not assemble a list of recent Suncoast/Lambert customers through such sources. See Platinum Managment, Inc. v. Dahms, 666 A.2d 1028, 1038 (N.J.Super.Ct. Law Div. 1995) ("[a]lthough the customers' names may be listed in [trade directories and other publications], the fact that they are customers of [plaintiff] is not."). The distinction is especially important given the facts of this case. If it is true, as plaintiff's allege, that defendants attempted to hold themselves out as Suncoast/Lambert, then a list of Suncoast/Lambert customers would have been an essential element of their scheme. By sending past Suncoast/Lambert customers a brochure bearing the Lambert name and containing identical tour packages, and then thanking them for their past patronage, defendants could convince many customers that they were in fact Suncoast/Lambert. At the very least, defendants could suggest that they were related to Suncoast/Lambert and could take advantage of the goodwill developed between Suncoast/Lambert and its customers.
Defendants argue that even if the master customer list and the hot prospects list are trade secrets, there is insufficient evidence from which a jury could find that Marian Lambert misappropriated the lists. Defendants contend that after Ms. Lambert left Suncoast/Lambert she made a list of senior group leaders she had worked with from memory. According to defendants, the corresponding addresses and telephone numbers of the persons on this list were acquired using telephone information, published lists, and the internet. Defendants have attached the handwritten list of sixty-six names as Exhibit N. Defendants cite several cases for the proposition that a former employee may use information about an employer's customers which is based on "casual memory." See Apollo Technologies Corp., 805 F. Supp. at 1202-03 (applying New York law).
The addresses and telephone numbers of these prospective customers do not appear on this handwritten list. Ms. Lambert testified that the addresses and phone numbers that corresponded to the names on her list were thrown away. (Plaintiff's Exhibit 3, 170:1-24).
Defendants' motion for summary judgment is denied as to this claim. It is not disputed that each of the sixty-six names on Ms. Lambert's handwritten list also appears on plaintiff's hot list. (See Defendant's memorandum, 11). Also, Jane McGarry-Flynn, an employee of Suncoast/Lambert, testified that she typed up the hot list the week before Mrs. Lambert left. (Plaintiff's Exhibit 26, 43). In addition, Mrs. Lambert was one of only two employees who was given access to the master list. (Plaintiff's Exhibit 7, Dep. of R. Adelizzi, 187-89). Ms. Lambert and Ms. McGarry-Flynn shared an office at Suncoast/Lambert. (Plaintiff's Exhibit 3, Dep. of Marian Lambert, 257-58). A reasonable trier of fact, could find that Ms. Lambert misappropriated the hot list or the master list and used the information therein to benefit her new enterprise, "The Lambert Group, Inc." See Apollo, 805 F. Supp. At 1202 ("[s]olicitation of an employer's customers by a former employee is not actionable unless there was wrongful conduct by the employee, such as [sic] a physical taking or copying of the employer's files or using confidential information.") (citations omitted).
2. Draft Copy of the 1999 Suncoast/Lambert Brochure
Defendant Marc Lambert initially testified that he did not copy any part of Suncoast/Lambert's brochure in developing the 1999 "Lambert Group" brochure. Defendants now contend, however, that their 1999 "Lambert Group" brochure was developed from already published copies of plaintiff's 1998 and 1999 brochures. Defendants correctly argue that the published Suncoast/Lambert brochures are not protectable as trade secrets. See Midland-Ross Corp. v. Yokana, 185 F. Supp. 594, 604 (D.N.J. 1960) (holding that blue prints and drawings which employer had distributed to suppliers were not trade secrets).
Defendant Marc Lambert denied that he copied any Suncoast/Lambert materials:
Q: In addition to drafting the so-called Dear Group Leader letter, it's your testimony that you conceived and put together all of the pages, destinations presented in [The Lambert Group's] brochure, correct?A: That is my testimony. Q: Did you copy any of them from any other source? A: No. . . .
Q: Did you copy the Suncoast/Lambert brochure for any part of your brochure Exhibit-33?A: No. Q: Excuse me? A: No. Q: You are sure about that? A: I'm positive. (Plaintiff's Exhibit 6, Deposition of Marc Lambert, March 17, 1999, 221-222).
Plaintiff alleges that defendants copied from a draft copy of their 1999 brochure before the final copy was released to the public. According to plaintiff, the draft copy of the subsequently published brochure does qualify as a trade secret. Plaintiff does not provide any case law in support of this proposition but asserts that "the Lambert Defendants gained an unfair competitive advantage by having Draft No. 1 before the final 1999 Brochure was made public." (Plaintiff's opposition, 22).
The Court finds that the draft copy of plaintiff's 1999 brochure was not a trade secret. Even if defendants did copy all or a portion of the draft copy, the uncontroverted evidence shows that they did not publish the "Lambert Group" brochure until after the final edition of Suncoast/Lambert's 1999 brochure had been bulk mailed to the public. Plaintiff mailed over one thousand copies of its final brochure on October 19, 1998. (Plaintiff's statement of facts, ¶ 25). Defendants did not mail the "Lambert Group" brochure until after November 7, 1998. (Id. at ¶ 28). There is no indication that defendants gained an advantage from copying the draft versus the final edition of plaintiff's brochure and defendants had ample time to copy either. "A trade secret may consist of a plan, process, formula, device or compilation of information used in one's business and which affords an opportunity to obtain an advantage over competitors who do not know or use it." Sun Dial, 108 A.2d at 366 (quoting Restatement of Torts § 757 cmt. b (1939)). Even if defendants gained some negligible trade advantage in having access to the draft copy of the brochure, plaintiff has not produced evidence sufficient to find that the draft copy was, in fact, protected as a trade secret.
3. "Cost Buildups"
Plaintiff and defendants offer differing versions of what constitutes a "cost buildup." Both parties agree, at minimum, that the cost buildups contain a list of vendors (hotel operators, restauranteurs, etc.) and price information for a particular tour package. Defendants argue that a cost buildup is not a trade secret because a person can readily assemble a list of hotels or restaurants and the prices they charge "by making a few telephone calls." (Defendants' reply, 12).
Plaintiff claims that considerable time and effort was invested in each cost buildup. According to plaintiff, a list of restaurants, hotels, and entertainment activities in a specific area was compiled. Plaintiff then surveyed the list to determine which vendors would particularly suit the needs of Suncoast/Lambert customers and negotiated prices with the most attractive vendors. The final cost buildup revealed the cost and expected profit from each tour plaintiff organized.
A trade secret can be "any information that can be used in the operation of a business . . . and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others." Trump Castle Assoc. v. Tallone, 645 A.2d at 1208 (quoting Third Restatement of Unfair Competition § 39). Clearly, defendants could gain such an economic advantage by misappropriating plaintiff's cost buildups. Not only could defendants then offer identical packages without expending the time and effort necessary to create a tour package, they would have a better position from which to bargain with vendors and would have "a roadmap for undercutting Suncoast/Lambert's prices." (Plaintiff's opposition brief, 25). Viewing the facts in the light most favorable to the plaintiff, plaintiff's cost buildups may be trade secrets. See Trump Castle Assoc., 645 A.2d at 1208 ("[a] trade secret can also relate to other aspects of business operations such as pricing and marketing techniques or the identity and requirements of customers.")
Also viewing the evidence in the light most favorable to the plaintiff, a reasonable juror could conclude that defendants misappropriated the cost buildups. As an employee of Suncoast/Lambert, Ms. Lambert had access to the cost buildups. Also, in nearly every case, the tour packages offered in the "Lambert Group" brochure are priced just two to five dollars less than the Suncoast/Lambert price. (See Plaintiff's Exhibits 8, 21).
Defendant Marc Lambert claimed to have developed his own cost buildups for the Lambert Group brochure. However, when asked to produce these cost buildups or to explain how he created them, he gave what could be interpreted as evasive answers:
Q: On the back of your brochure, sir, Exhibit-33, you say we also provide trips to these destinations, and then you list eight destinations.A: Yes. Q: Have you prepared cost build-ups for any of those trips? . . . A: I have at one time, yes. Q: Why were they not produced to us?
A: Because I don't — they were specific tours that I — if they didn't take them I threw away. I know a woman had asked me for Vermont and New Hampshire. I had done a proposal for her, she decided not to take the trip, so there was no reason to keep it around.Q: As of today, do you have a cost build-up for Cape May?
A: No, because I — I don't — I very well may not because I could do it in my head.(Plaintiff's Exhibit 6, 242:6-9, 243:11-24).
. . .
Q: In looking at Exhibit-35, Mr. Lambert, I don't see any written confirmation of the prices that are set forth here. Did you receive any written confirmation from anybody as to hotels, tours or restaurants?A: I'm sure — I'm sure I did.
Q: Do you not keep those in the files with your cost and profit analysis?
A: I mean if they are here I did. If they are not, I didn't. I mean once I received confirmation from a certain place, and I typed up the cost build-up or whatever you want to call it, then I probably threw it away. The whole — my whole goal has been to try and cut down on the paperwork.( Id . at 279:4-19).
D. Unfair Competition
In count four of her complaint, plaintiff charges defendants with unfair competition under the New Jersey Fair Trade Act, N.J.S.A. 56:4-1. In count five, plaintiff charges defendants with unfair competition under New Jersey common law.
N.J.S.A. 56:4-1 provides: "No merchant, firm or corporation shall appropriate for his or their own use a name, brand, trade-mark, reputation or goodwill of any maker in whose product such merchant, firm or corporation deals." The statute is a codification of the common law prohibition against unfair competition. Columbia Broadcasting Sys., Inc. v. Melody Recordings, Inc., 341 A.2d 348, 351-52 (N.J.Super.Ct. App. Div. 197 5). Under either the statute or common law, "unfair competition" is defined broadly to include conduct beyond mere trade name infringement. See American Shops, Inc. v. American Fashion Shops of Journal Square, Inc., 80 A.2d 575, 577 (N.J.Super.Ct. App. Div. 1951) (holding that the common law of trademarks is part of the broader common law of unfair competition). The common law tort of "unfair competition" has been held to encompass two separate claims: "palming off" and "pirating."
1. Palming-Off
A defendant may not "by imitative devices" attempt to "mislead prospective purchasers into buying their merchandise under the impression that they are buying that of their competitors." American Shops, 80 A.2d at 580 (quoting Weiss v. Stork Gift Shop, 45 A.2d 688, 692 (N.J.Super.Ct. Ch. Div. 1946)). The essential question is whether defendant has engaged in unfair practices in a manner which is likely to deceive purchasers regarding the source of the services being offered. Estate of Elvis Presley v. Russen, 513 F. Supp. 1339, 1373 (D.N.J. 1981).
For the reasons set forth in section I of this opinion with respect to plaintiff's trade name infringement claim, plaintiff has established that defendants actions were likely to deceive purchasers about the source of its services. Defendants sent plaintiff's customers a brochure bearing the Lambert name and containing nearly identical tour descriptions. In addition, defendants included language which suggested a connection between Suncoast/Lambert and "The Lambert Group." Defendants motion for summary judgment is therefore denied as to plaintiff's claim that defendants attempted to "palm off" their bus tour service as a service of Suncoast/Lambert.
2. Pirating
It is unfair competition for a defendant simply to take the goods or services of another and market them as his own. See Columbia Broadcasting Sys., 341 A.2d at 353 (holding that misappropriation and tortious exploitation of another's product may constitute unfair competition without a palming off) (citations omitted). There is a distinction between permissible imitation of a product and actually marketing an identical product developed by another. Id.
Plaintiff claims that defendants pirated its business by offering an identical selection of tour packages. According to plaintiff, the tours offered by defendants are not "merely imitations or approximations of Suncoast/Lambert's tours, they are the same tours, which were developed over the years at great effort and expense by Suncoast/Lambert." (Plaintiff's opposition, 32.)
Citing to the case of Hamilton Johnston Co. v. Johnston, 607 A.2d 1044 (N.J.Super.Ct. App. Div. 1992), defendants argue that their conduct constitutes a permissible imitation of plaintiff's services. In that case, former employees of plaintiff, a financial consulting firm, opened up a competing business and prepared financial reports using the same text and format as their former employer. The Appellate Division held that this conduct constituted permissible imitation, not misappropriation. The Court emphasized that, "[d]efendants have utilized their own efforts, money and resources to produce their own product. The essence of a financial report is the data or figures, not the format or text." Id. at 1054. The Court contrasted this case with the court's holding in Columbia Broadcasting Sys., and held that, in this case, "[d]efendants have not appropriated any unique, artistic or creative work." Id. The distinction, the court held, was between copying a "design or concept" as opposed to the entire finished product. Id.
In the instant case, a reasonable trier of fact could find that defendants copied more than a mere "design or concept." Plaintiff has presented evidence from which a trier of fact could find that defendants not only copied plaintiff's name, but also plaintiff's list of customers, tour packages, price information and brochure. A rationale juror could find that defendants did not merely simulate plaintiff's service, but rather, copied "the very product which plaintiff produced with its own resources." Columbia Broadcasting Sys. 341 A.2d at 353 (quoting Liberty/UA, Inc. v. Eastern Tape Corp., 181 S.E.2d 600 (N.C.App. Ct. 1971)). Therefore, defendants motion for summary judgment as to plaintiff's claim of pirating is denied.
II. Defendant Hunsberger's Motion for Summary Judgment
In count VI of the complaint, plaintiff charges defendant Douglas Hunsberger with misappropriation of trade secrets and in count XI plaintiff charges him with interference with prospective economic advantage. In addition, in count VIII plaintiff charges him with conspiracy to commit each of these underlying torts. For the reasons set forth below, defendant's motion for summary judgment is granted as to all three counts.
FACTS
Douglas Hunsberger (hereafter "Hunsberger" or "defendant") is the graphic designer who laid out the 1999 "Lambert Group" brochure. In laying out this brochure, Hunsberger used materials given to him by Marc Lambert including a copy of the Suncoast/Lambert brochure. Defendant cut and pasted portions of the Suncoast/Lambert brochure onto "storyboards" representing pages of what would be the "Lambert Group" brochure.
Defendant sent the storyboards to a printer, Denene Bartuccio. On October 22, 1998, Hunsberger wrote Bartuccio and told her to remove any reference to Suncoast/Lambert from the Lambert Group brochures. Hunsberger told Bartuccio that the presence of the Suncoast/Lambert trade name on the printed brochures could "cause a lawsuit." (Plaintiff's Exhibit 29).
Once the Lambert Group brochure was published, Hunsberger destroyed the raw materials given to him by Marc Lambert. Hunsberger claims that this is standard practice in the industry. The Lambert defendants paid Hunsberger approximately $14,000 for his work on the brochures.
DISCUSSION
A. Misappropriation of Trade Secrets
Because the Court has already decided that the draft copy of plaintiff's 1999 brochure does not constitute a "trade secret," defendant's motion for summary judgment is granted as to this claim.
B. Interference with Economic Advantage
In order to state a claim for tortious interference with economic advantage, plaintiff must allege that: (1) it had a continuing or prospective economic relationship or reasonable expectation of economic advantage; (2) the defendant knew of such relationship of expectancy; (3) the interference and harm inflicted were done intentionally and with "malice"; (4) if not for the interference, it was reasonably probable that plaintiff would have realized its economic advantage; and (5) the plaintiff was injured as a result of defendants conduct. Eli Lilly and Co. v. Roussel Corp., 23 F. Supp.2d 460, 493-94 (D.N.J. 1998) (citingFineman v. Armstrong v. Armstrong World Indus., Inc., 980 F.2d 171, 186 (3d Cir. 1992)).
In the instant case, defendant moves for summary judgment on the ground that plaintiff has failed to allege facts sufficient to show that defendant acted with malice. Defendant claims that plaintiff cannot show that he acted with knowledge that the Suncoast/Lambert brochure was a trade secret or otherwise confidential.
For purposes of this tort, "malice is not used in the literal sense requiring ill will toward the plaintiff." Printing Mart-Morristown v. Sharp Elec. Corp., 563 A.2d 31, 37 (N.J.Sup.Ct. 1989) (quoting Restatement Second of Torts, Ch. 37 at 5). "Rather malice is defined to mean that the harm was inflicted intentionally and without justification or excuse." Id. (citing Rainer's Dairies v. Raritan Valley Farms, Inc., 117 A.2d 889 (1955)).
Plaintiff relies on several separate allegations to support its claim that defendant acted with malice. First, plaintiff notes that Hunsberger stated, in his deposition, that Marc Lambert treated the Suncoast/Lambert and another company's brochure "like they were gold." (Plaintiff's Exhibit 21, Dep. of D. Hunsberger, 55:7). Second, plaintiff points to two letters written by Hunsberger to Ms. Bartuccio in which Hunsberger warned her to remove the Suncoast/Lambert name in order to avoid the risk of a lawsuit. Third, plaintiff argues that Hunsberger's destruction of the computer disk and raw materials used to create the Lambert Group brochure indicates a malicious state of mind. Fourth, plaintiff notes that Hunsberger initially refused to identify the type-setter, Delene Bartuccio, claiming that her identity was a confidential. Finally, plaintiff notes that Hunsberger initially failed to respond to a subpoena to appear for a deposition. Plaintiff concludes that these facts "serve as evidence that he knew that the fruits of his efforts on Defendants' behalf would economically injure Suncoast/Lambert by usurping Suncoast/Lambert's trips and customers." (Plaintiff's opposition, 10).
The Court disagrees with plaintiff's analysis. Viewing the evidence in the light most favorable to the plaintiff, the above-mentioned facts suggest that defendant may have acted foolishly or inappropriately. There is, however, insufficient evidence to support an inference that defendant intentionally or maliciously interfered with Suncoast/Lambert's prospective business.
C. Civil Conspiracy
"The gravamen of an action in civil conspiracy is not the conspiracy itself but the underlying wrong which, absent the conspiracy, would give a right of action." Board of Educ. of City of Asbury Park v. Hoek, 183 A.2d 633, 646 (N.J.Sup.Ct. 1962) (citations omitted). Because defendant's motion is granted as to plaintiff's claims of misappropriation of trade secrets and tortious interference with prospective economic relations, it is also granted as to plaintiff's claims of civil conspiracy.
CONCLUSION
For the reasons set forth above, the Lambert defendants' motion for summary judgment is granted as to plaintiff's claim, in count VI, that defendants misappropriated a copy of plaintiff's brochure. Defendants' motion is denied as to all other counts.See footnote 12 Also for the reasons set forth above, defendant Hunsberger's motion for summary judgment is granted in its entirety and he is hereby dismissed from the case. The Court will issue an appropriate order.
The Lambert defendants address only six of the twelve counts in plaintiff's complaint, however, they ask the Court to treat their motion as a motion for full summary judgment because "the last 6 counts are all derivative of the unfair competition and trade secret claims made in the first 6." (Defendants' reply, 2, note 1). Because the Court has denied defendants motion with respect to plaintiff's unfair competition claim and two of plaintiff's trade secret claims, defendants' motion regarding the latter six, unaddressed claims is also denied.