Subcarrier Communications, Inc. v. Day

299 N.J. Super. 634, 691 A.2d 876 (App. Div. 1997)
  • Opinion Date: April 16, 1997

NON-COMPETITION; CONFIDENTIALITY—The Court refuses to bar an ex-employee from using her former employer’s customer list and forms because there was no employment contract. The Court also questions whether an independent contractor has any such obligation in the first place.

A consulting firm searches for and leases sites on towers and buildings for communication companies to place their wireless communication devices. Defendant was a corporate vice president whose job had included maintaining the company’s confidential rate structure and client lists. She was hired by another company to build an antenna site management business for them, which included creating a database of potential sites. The consulting firm sought and obtained a preliminary injunction enjoining its former employee (and her new employer) from benefitting from her misappropriation of a “Point of Contact” list that belonged to the consulting firm, despite the ex-employee’s claims that she never used the information on the list and that this information was readily available in the public domain. She was enjoined from soliciting certain customers of the consulting firm and disclosing certain information she knew about the consulting firm.

The Appellate Court held that injunctive restraints should not be issued to prohibit an employee from using an employer’s customer list when the information on that list is not confidential and is readily available to the public. The Court ruled that matters learned during the course of employment may be used by an employee to her benefit as long as there is no contract that prohibits her from divulging that information. In this case, defendant was under no contract, the subject matter of the list was not a trade secret and did not give the consulting firm an advantage over competitors. Therefore, the consulting firm could not preclude defendant from using it in her new job. In support of its decision, the Appellate Court explained that a preliminary injunction:

(a) is supposed to maintain the parties in the same position they were in when the litigation began,
(b) is usually granted only when there would be irreparable harm done that money damages cannot redress,
(c) should not be granted without assessing the relative hardships to the parties of granting or denying the injunction,
(d) should not be granted without requiring the party seeking it to make a showing of probable success on the merits, and
(e) should not be used where the legal rights of the parties are unsettled and material facts remain in dispute.

The Court also held that the ex-employee could make plans for future employment in the same industry, while still employed, without breaching the duty of loyalty to her employer as long as she does not compete with her employer before leaving the company. Since defendant had no agreement not to compete and did not solicit customers from the consulting firm, the injunction was rejected. Finally, the Court held that using the consulting firm’s lease form was not improper since the form was not copyrighted or a trade secret.

Perhaps the most interesting aspect of this case is an issue yet to be decided. The consulting firm categorized defendant as both an independent contractor and a vice president of the company. Defendant argued that she owed no duty to the consulting firm since she was an independent contractor. The Court found the consulting firm’s dual categorization “interesting” and “apparently novel,” and held that any final determination by the Chancery Division must include a determination whether the lists compiled by defendant were her property, the consulting firm’s, or are shared property.