In an unpublished case, the Appellate Division overruled a trial court's finding that customer lists used by a former employee to compete with his former employer were not considered protected trade secrets. The trial court held that the information was not protected since the names, addresses and phone numbers of the people on the list were "well known in the industry" and therefore it was immaterial that the defendant obtained the information from his former employer's database. However, the Appellate Division opined that a more detailed analysis is required pursuant to Lamorte Burns & Co. v. Walters, listing the factors to be considered as follows: (1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the owner to guard the secrecy of the information; (4) the value of the information to the business and to its competitors; (5) the amount of effort or money expended in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Given these factors and the specific facts of the case at issue, the appellate court ruled that there were issues of fact as to whether or not the customer lists were protected trade secrets and consequently remanded the case for trial. (Steris Corporation v. Shannon)
Business entities, including properly-formed foundations, are separate legal entities that are distinct from the individuals associated with those entities. Consequently, there is a "corporate veil" that cannot be breached to impose liability on such an entity unless the elements required to pierce the corporate veil are proven. In the recent unpublished Appellate Division decision, the court confirmed this premise and found that the John "Jack" Phillips Family Foundation LTD. was not responsible to pay a judgment entered against John Phillips Jr. individually. In doing so, the court stated, "Like any other person or entity, the Foundation was entitled to due process, which would include the right to have the civil claim against it set forth in a complaint, the right to be personally served with that complaint, the right to file a responsive pleading, the right to discovery, and all the other rights delineated in our court rules prior to the entry of a judgment against it. See Nelson v. Adams, 529 U.S. 460, 465-66 (2000). The proceedings in the trial court short-circuited all these rights. Indeed, it seems as though the mechanism employed in the trial court required that the Foundation disprove its liability rather than requiring plaintiff to prove its entitlement to relief." Consequently, absent a separate lawsuit and requisite proofs, the only person or entity responsible for the judgment would be the individual defendant who was named in the lawsuit. (Comegno Law Group, PC v. John Phillips, Jr.)
In New Jersey, the Uniform Fraudulent Transfer Act ("UFTA") is codified at N.J.S.A. 25:2-20 to -33 and provides protection to creditors of companies that sell off their assets without providing adequate security for the company's creditors. In a March 8th unpublished opinion of the Appellate Division, the court agreed with the trial judge that a fraudulent transfer occurred when the proceeds of the sale of a Dunkin' Donuts were distributed to the owners of the company without providing adequate security to satisfy a lease guaranty that the company remained obligated on.
The company that owned the Dunkin' Donuts location was called ARCP, LLC and they sold the location to a new entity in 2010. As part of the sale, the commercial lease was assigned to the buyer but ARCP remained as a guarantor on the lease. Despite the fact that ARCP remained as a guarantor on a lease that had multiple years remaining, ARCP disbursed all of the proceeds from the sale by paying off any debts due at the time and then disbursing the remaining $326,793.19 to the members of ARCP, leaving ARCP insolvent. Eventually, the buyer defaulted on the lease and declared bankruptcy, resulting in the landlord enforcing the lease guaranty of ARCP as there were significant monies owed. The Appellate Division agreed with the trial court that the transaction demonstrated the "badges of fraud" that a court uses to determine whether or not a fraudulent transfer had occurred. Although there was no lease default at the time of the sale of the location, the lease guaranty was a contingent liability that should have been accounted for prior to the disbursements to the members. Accordingly the individual members were found liable for the $291,464.94 judgment obtained by the landlord. (Main Land Sussex Company, LLC v. Priti Shetty, et. al.)