New Jersey Lawyer & Attorney : Stark & Stark Law Firm : New Jersey Law Blog

Mon Cheri Bridals, Inc. v. Wen Wu et al, Civil Action No. 04-1739 (AET)

Mon Cheri Bridals, a large wholesale manufacturer of wedding dresses and social occasion dresses, brought suit in U.S. District Court in Trenton, New Jersey against a competitor, Wen Wu and various companies he owned and controlled, alleging that Mr. Wu and his companies infringed on Mon Cheri’s copyrights in its dress designs, and breached a 1999 contract between the companies.

The initial dispute arose in August of 1998 between Mon Cheri and Wu concerning dress designs. Mon Cheri discovered that Wu was marketing his dresses using photographs of more expensive versions that Mon Cheri manufactured and sold.

Wu signed an affidavit swearing that he, and the other companies he owned and controlled, would not infringe upon Mon Cheri’s rights in the future. Mon Cheri later learned that Wu continued to sell dresses that infringed upon Mon Cheri’s copyright and trade dress rights.

 
The case went to trial before the Hon. Anne E. Thompson, U.S.D.J.  After two weeks of trial, on April 4th the jury returned a verdict in favor of Mon Cheri Bridals on its claims for copyright infringement, unfair competition and breach of contract.  The jury awarded Mon Cheri compensatory damages of $324,000 and punitive damages of $375,000, for a total verdict of $699,000. 

Mon Cheri Bridals, Inc. was represented by Craig S. Hilliard, Esq. and Martin P. Schrama, Esq., Shareholders of Stark & Stark’s Litigation Group.

• Print
• Comments
• Trackbacks

Martin P. Schrama and Melissa D. Doogan authored the article Recent Revisions to the Trademark Trial and Appeal Board Rules for the New Jersey Law Journal's April 14, 2008 Intellectual Property & Life Sciences Supplement.

The article discusses the impacts the substantial rule changes set forth by the Trademark Trial and Appeal Board and the United States Patent and Trademark Office will have on trademark opposition and cancellation actions.

You can read the full article here.

• Print
• Comments
• Trackbacks

The March 24, 2008, edition of the New Jersey Lawyer reported that the New Jersey Attorney General is investigating whether or not it’s Division of Consumer Affairs should assert fraud or Consumer Fraud claims against JuicyCampus.com, a free website which allows individuals to post anonymous opinions to "often nonsensical and sometimes vicious discussions" about who’s the most overweight student on campus, or who on campus has the most morally casual attitude? This invites the following question: can the New Jersey Attorney General successfully assert claims against this website? Probably not.

The New Jersey Consumer Fraud Act.

New Jersey enjoys one of the strongest consumer protection statutes in the United States.  New Jersey Courts have consistently emphasized that like most remedial legislation, the New Jersey Consumer Fraud Act ("CFA") is to be construed liberally in favor of consumers. Although initially designed to combat "sharp practices and dealings" that victimized consumers by luring them into purchases through fraudulent or deceptive means, the Act is no longer aimed solely at "shifty, fast-talking and deceptive merchants" but reaches "non-soliciting artisans" as well. Thus, the Act is designed to protect the public even when a merchant acts in good faith. Despite the same, it appears that the CFA will not be a viable claim against the Juicy Campus website because it did not engage in activities which violate the CFA.

The CFA only recognizes three forms of violations.  They are: (1) misrepresentations of fact; (2) knowing omission of fact; and (3) per se violations of administrative code.  Cox v. Sears Roebuck & Co., 138 N.J. 2 (1994)The first apparently problem with the State’s possible case against the website is that most of the statements posted on the website appear to be "opinions" rather than "facts."  Opinions are generally not actionable under the CFA.  Moreover, in order for there to be a violation of the CFA, the State would need to prove that a consumer suffered an ascertainable loss which is has a casual connection to the misrepresentation, omission or per se violation of the act. In other words, the State would have to prove that the recipient of the false information suffered a loss as a result of reading those false statements.

FRAUD

In order to prove fraud, the State of New Jersey would have to prove by "clear and convincing evidence" that the defendant made a material misrepresentation of a presently existing material fact, with knowledge of its falsity and with the intention that the other party rely thereon, resulting in reliance in that party to its detriment. The first procedural hurdle the State would face if it were to assert a fraud claim is that it may not have standing to assert that claim because it did not suffer and damages.  Unlike the CFA which gives the Office of the New Jersey Attorney General powers to assert claims under that Act, N.J.S.A. 56:8-3, in order to have standing to assert a common law fraud claim the State would need to demonstrate that it was somehow damaged. Perhaps, if the website in question has false statements about State colleges or universities, the State would have standing to assert a fraud claim. Since it appears not to be the case, I believe that any common law fraud claim asserted by the State would be subject to dismissal for lack of standing.

Like a CFA claim, the State would have trouble asserting a fraud claim because it appears that the statements made on the website were opinions rather than knowingly false presently existing material facts. Again, under the CFA and fraud opinions are not actionable.  Thus, unless the website posted a knowingly false presently existing material fact such as "X State University admitted 25 students who’s grade point averages and SAT scores were 90% below the mean SAT and GPA requirements because those students had ties to Governor X," the State could not assert common law fraud claims.

Moreover, in prove fraud, the State would need to prove that the website posted those presently existing false statements with knowledge that they were false at the time they were placed. The first issue is that the website simply hosts the statements of others. The website is really not making any statements. It also appears that as a result of the same, it would be extremely difficult for the State to prove that the website knew that the factual statements were false at the time they were made.

Finally, as discussed above, it appears that the State would not be able to prove by clear and convincing evidence that it detrimentally relied on those false statements and suffered damages as a result of the same. In order to successfully prosecute a fraud claim, the Plaintiff must prove amongst other things that it detrimentally relied upon the false statements and suffered damages as a result. A classic example of a party detrimentally relying and suffering damages is "Seller provides knowingly false income statements to a potential buyer, the buyer in doing its due diligence relies on the knowingly false income statements and purchases the company. After the purchase, the buyer learns that the pro-offered income statements were inflated and the company was not worth anywhere near what it paid for the company." In the aforementioned example, the buyer detrimentally relied on the false income statements and suffered damages as a result. It seems unlikely that the State of New Jersey detrimentally relied upon what was posted on the website in question and suffered damages as a result.

For the reasons stated above, the New Jersey Attorney General may want to consider not asserting charges against JuicyCampus.com.

• Print
• Comments
• Trackbacks

 The Honorable Gerald C. Escala of the Superior Court of New Jersey, Chancery Division, Bergan County issued an interesting decision which provides additional guidance on the legal issue of minority oppression along with the calculation of “fair value” of the minority owners stock. In Venturini v. Steve’s Steak House, 2006 WL 445059, two nephews who collectively owned fifty percent of Steve’s Steak House filed a complaint against their aunt, Marie Damiani (“aunt” or “Marie”) alleging that they were oppressed minority shareholders.

The nephews, Steve Venturini, III (“Steve III”) and Gregg Venturini (“Gregg”) collectively obtained fifty percent ownership in the corporation when their father, Steve Venturini, II, died in or about 2001. Around the time of their father’s death, Marie offered to purchase Steve III and Gregg’s interest in Steve’s Steak House, Inc. (“the corporation” or “Steve’s Steak House”). Growing up, Steve III and Gregg rarely worked for the corporation. On occasion they would open up or close the restaurant of perform odd jobs for the corporation. Despite the same, for a significant period of time, even after the litigation was commenced by them in the Superior Court of New Jersey, Chancery Division, Bergan County, they received approximately $750.00, per week from the corporation. Marie and her child, Blaise were full time employees of the corporation for a majority of their lives.

Moreover, the court found that Gregg had several physical altercations with his cousin, Blaise. During the course of one altercation, Gregg threatened and did return with his firearm. The local police were called and Gregg was eventually ordered to surrender all of this firearms.

Eventually, Marie terminated Gregg’s and Steve III’s employment and “locked them out” of the business property. As a result of those actions, Gregg and Steve III, commenced this case. In their complaint they sought an accounting, dissolution of the corporation, damages, fees, and costs, and “any and all further relief that this court deems equitable and just.”

The first issue the Venturini Court needed to address was whether or not Gregg and Steve III, were oppressed minority shareholders. The Court held they were not. The Court found that Gregg and Steve, III, were not actively involved in the corporation. As stated above, they were not regularly employed by the corporation. The Court found that their involvement was “passive” and held that “equity does not aid one whose indifference contributes materially to the” complained of injuries. Harrington v. Heder, 109 N.J. Eq. 528, 534 (E & A 1934). Moreover, the Court found that “mere disagreement or discord between the shareholders is not sufficient to prove a violation of the [minority oppression] statute.” Citing, Brenner v. Berkowitz, 134 N.J. 488, 505 (1993).

The second issue the Court had to address was whether or not the corporation should be dissolved. It found that Steve’s Steakhouse should not be dissolved. The Court in making that determination followed well-established precedents which state that dissolution “is not appropriate” where the corporation is a viable entitle. Steve’s Steakhouse was a thriving business. To dissolve it would be inequitable and contrary to the law and public policy. The Court found that the appropriate remedy in this case was the Court Ordered sale of Steve III’s and Gregg’s stock because it found that “there has been an irretrievable breakdown in the relationship of the shareholders.” Citing, Musto v. Vidas, 281 N.J. Super. 548 (App. Div. 1995); Rova Farms Resort, Inc. v. Investors Ins. Co. of Am., 65 N.J. 474 (1974); see also N.J.S.A. 14A:12-7(8).   The Venturini Court found despite the fact that it did not find that Steve III and Gregg were oppressed, courts of equity have the power “to mandate the buyout.” Citing, N.J.S.A. 14A:12-7. As a result of the same, it considered the testimony of various expert witnesses, so that it could opine as to the “fair value” of Steve III’s and Gregg’s interest in Steve’s Steakhouse.

With regard to the valuation, the Court followed well-established legal precedent and decided that the date of valuation should be the date Steve III and Gregg filed their complaint. In order to determine the fair value of the corporation, the Court considered the valuation of two experts for each side who were charged with providing an opinions of the fair value of the earnings of the corporation along with its principal asset, the building which housed the restaurant.

Finally, the Court decided not to award pre-judgment interest and counsel fees to Steve III or Gregg. The reason it refused to award pre-judgment interest is because it found that the $750 a week pay the brothers received both pre- and during the pendency of the litigation was probably far more than they should have received because they did not provide services for the corporation. Moreover, the Court decided not to award counsel fees to either party because it opined that neither side truly prevailed.

• Print
• Comments
• Trackbacks

Shore Orthopaedic v. The Equitable is an important case in a policyholder’s arsenal - supporting the right to obtain a disability carrier’s underwriting manuals to challenge a claim denial.

The Appellate Court decided on January 24, 2008 that a $50,000 counsel fee award by the trial judge in favor of plaintiff was the proper sanction, after the disability carrier, Equitable, delayed producing its underwriting manual.  One of Shore Orthopaedic’s practitioners became disabled and unable to pay his share of the overhead expenses of the medical group.  The practice owned a disability policy through Equitable intended to pay the practice benefits to reimburse for overhead expenses the doctor, insured under the policy, was unable to pay.  The policy provided that the benefits would be paid directly to the medical practice as the owner of the policy.

During discovery, Shore demanded a copy of Equitable’s underwriting manuals.  The trial judge determined that Equitable intentionally obfuscated plaintiff’s request for the manuals which were eventually produced after they “surfaced.”  Plaintiff was awarded attorney’s fees from the time of the first discovery request through its motion for summary judgment.

The decision to award counsel fees was within the trial court’s discretion under R. 4:42-9, even though the court rejected plaintiff’s request for counsel fees under the Frivolous Lawsuit statute or under the statute providing for reimbursement of attorney’s fees in an action upon a liability or indemnity insurance policy, traditionally limited to “third party” claims in New Jersey as a matter of policy.

Thus, the importance of the opinion is that while the court did not award counsel fees under what would have been a significant modification to the rule, by allowing attorney’s fees in what the court determined was a “first party” insurance claim, the case affirms a plaintiff’s right to obtain underwriting manuals from a defendant disability insurance carrier.  An issue in the case was whether the insurance carrier acted properly in denying the claim.  The court agreed that the carrier’s handling of the claim, i.e. disputing the insured’s medical condition, warranted an examination of the carrier’s claims handling procedure, as revealed in its underwriting manuals.

• Print
• Comments
• Trackbacks

Kevin M. Hart, Shareholder and member of Stark & Stark 's Litigation group, was a participant in the September 2007 legal roundtable for GC Mid-Atlantic, titled Internal Investigations: Current Issues, Practical Guidance.

The panelists discussed various issues a company will face when the decision has been made to conduct an internal investigation of a corporation. Some of the topics discussed include the initial issues a company will face when conducting an investigation, deciding who will conduct the investigation, maintaining the integrity of the investigation, what kind of reports to provide once the investigation has concluded, and a discussion on compliance programs.

You can read the full report of the legal roundtable here.

• Print
• Comments
• Trackbacks

The New Jersey Supreme Court has adopted New Jersey Rule of Evidence 519 entitled “Mediation Privilege” to become effective July 1, 2008.  It provides that a mediation communication is privileged and shall not be subject to discovery or admissible in evidence in a proceeding unless waived or precluded under limited circumstances further defined in the amendment.

However, evidence or information that is otherwise admissible or discoverable does not become inadmissible or protected from discovery solely by reason of its disclosure or use in a mediation.

The parties to a mediation may expressly waive the privilege, and in the case of the privilege of a mediator, it may be expressly waived by the mediator.

Among the exceptions, where the privilege does not apply are the following:

1.    Communications made during a public mediation;
2.    A threat or statement of a plan to inflict bodily injury;
3.    Communications sought or offered to prove or disprove a claim or complaint against a mediator arising out of a mediation;
4.    Communications offered to prove or disprove a claim or complaint of professional malpractice; and
5.    Communications sought or offered to prove or disprove child abuse or neglect in a proceeding involving DYFS, unless DYFS participates in the mediation.

The privilege does not exist where a court, administrative agency or arbitrator finds that the party seeking discovery where the proponent of the evidence has shown that the evidence is not otherwise available, that there is a need for the evidence that substantially outweighs the interest in protecting confidentiality and the that the mediation communication is sought or offered in a proceeding involving a crime or to avoid liability on a contract arising out of the mediation.

A mediator may not make a report or recommendation regarding a mediation to a court.

The foregoing evidence rule expands upon New Jersey Court Rule 1:40-4 “Mediation - General Rules” which include a “confidentiality” provision.  It mirrors several provisions within the New Jersey Uniform Mediation Act, N.J.S.A. 2A:23C-1 to 13.  The evidence rule reaffirms the court’s intent to foster uninhibited communication during mediation, so as to further the goal of creating an environment wherein the parties will discuss freely their respective positions creating greater opportunities for settlements to occur.

• Print
• Comments
• Trackbacks

In most cases, the single most important issue in a minority shareholder oppression dispute is the valuation of the complaining shareholder’s interest in subject closely held company. One important sub-issue is the applicability of marketability and minority discounts in valuing a less than controlling interest in the subject closely held corporation.

Before considering whether or not these discounts are applicable, a general understanding of the marketability and minority discounts and the rationale behind them is important. Generally, a minority discount is an adjustment which could be applied based upon the minority shareholder’s lack of control over the closely held business entity. The theory behind the minority shareholder discount is that non-controlling shares of non-publicly traded stock are not worth their proportionate share of the firm’s value because the minority owner lacks voting power to control the corporation’s actions.  The marketability discounts adjusts for a lack of liquidity in one’s interest in an entity, on the theory that there is a limited supply of potential buyers of the stock of a closely held corporation.

The general rule in New Jersey is that in a statutory appraisal for purposes of determining the “fair value” of shareholders owned by a dissenting shareholder, N.J.S.A. 14A:11-1 to -11, or for valuing shares in a court-ordered buy-out resulting from an oppressed shareholder situation, N.J.S.A. 14A:12-7(1)(c), neither a marketability nor a minority discount should be applied absent extraordinary circumstances.  Balsamides v. Protameen Chemicals, Inc., 160 N.J. 352 (1999); Lawson Mardon Wheaton, Inc. v. Smith, 160 N.J. 383 (1999).  In other words, marketability and minority discounts generally are not applied in New Jersey valuation proceedings where there will be no actual transfer of shares and a sale of the entire business appears unlikely. Denike v. Cupo, 394 N.J. Super. 357, 383 (App. Div. 2007) (citing, Brown v. Brown, 348 N.J. Super. 466, 489 (App. Div. 2002)).

Although, the general rule sets forth that these discounts should not be applied the New Jersey Supreme Court has held that where “extraordinary circumstances” exist the application of the marketability and minority discounts maybe warranted.   For example, in Balsamides the New Jersey Supreme Court found that a 35% marketability discount was appropriate because the oppressing 50% shareholder who was to acquire the shares of the oppressed 50% shareholder. The Balsamides Court found that equity demanded that the oppressor not be rewarded for his conduct by allowing a buy out at a discounted price.  Hence, these discounts maybe applied where equity dictates. 

It is extremely important that all parties involved in minority oppression litigation consider whether or not “extraordinary circumstances” warrant their application. Moreover, it is extremely important for the advocates to either prove or disprove that there are extraordinary circumstances present that warrant the application of the marketability and/or minority discounts. It is important to consider these principals throughout the litigation. Whether or not these discounts apply will have a huge impact on the ultimate resolution of this complicated form of litigation.

• Print
• Comments
• Trackbacks

Thomas B. Lewis, Chair of Stark & Stark's Employment Group, and Shareholder of Stark & Stark's Litigation Group, was quoted in the August 6, 2007 issue of the National Law Journal, in the article, Litigation Gets Personal.

You can read the full article here.

• Print
• Comments
• Trackbacks

Paul W. Norris, Shareholder and member of Stark & Stark's Litigation Group, was quoted in Friday's New Jersey Law Journal Article, Californian Can Be Sued in NJ for Alleged Libel on Internet.

The article discusses the recent decision in Goldhaber v. Kohlenberg, which states that making libelous statements in a web-based forum can be grounds for suit in New Jersey, because the material was "targeted" toward a New Jersey Audience.

You can read the full story here.

• Print
• Comments
• Trackbacks