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Forman Industries, Inc. v. Blake-Ward

A-5581-06T3 (N.J. Super. App. Div. 2008) (Unpublished)

EMPLOYER-EMPLOYEE; NON-COMPETITION — While customer lists can be considered confidential and protectable, they are not subject to protection if an ex-employer’s customers are generally known in the industry or are easily discernable.

A company sued a former employee, alleging that the employee had breached his duty of loyalty to it by diverting confidential information and customers to his new employer. It also alleged the new employer induced the employee to engage in such conduct, and that both reaped the benefits of the employee’s disloyalty.

The employee had been unhappy with his employment situation and shared concerns about his company’s financial stability with the new business that became his employer. The employee had ten years of experience in the field and had numerous industry contacts before joining his ex-employer. He never solicited business in his capacity with his employer. He left the company one month after tendering his resignation. Shortly after, five other employees joined him at his new employer, as did one client. At trial, the ex-employer claimed that as a result of its former employee’s breach of loyalty and diversion of confidential information, it had lost clients and profits. The employee and his new employer filed a motion for summary judgment, which was granted. The company appealed, and the Appellate Division affirmed. The Court noted that an employee has a duty of loyalty to his employer while he is employed and that duty prohibits him from taking affirmative steps to injure an employer’s business, such as competing with his employer’s business or assisting a competitor. However, an employee has the right to plan and prepare for future employment so long as he does not solicit customers or do other acts in direct competition with his employer.

In this case, the Court found that the company did not present any proof that its former employee took client information, solicited those clients, or misled the employer about his future plans. The Court rejected the company’s claims that its former employee misappropriated the company’s financial and customer information. The Court agreed with the lower court’s finding that the ex-employer could not claim misappropriation of confidential information without showing that it took precautions to safeguard such information. In this case, the ex-employer’s employment agreements did not contain non-disclosure provisions and its employees were not required to sign confidentiality agreement. The Court rejected the ex-employer’s claim that the company handbook contained non-disclosure provisions, finding no evidence that the former employee received the handbook. Further, the handbook did not describe the nature of the information deemed to be confidential. The Court also rejected the company’s unfair competition claim. In doing so, it noted that while customer lists can be considered confidential and protectable, they are not subject to protection if an ex-employer’s customers are generally known in the industry or are easily discernable. In this case, there was no evidence that the ex-employer’s customers weren’t known in the industry or that the service it provided its customers required secrecy.


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