INTERLINK GROUP CORPORATION USA, INC. v. AMERICAN TRADE AND FINANCIAL CORPORATION et al
FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by Magistrate Judge James B. Clark on 2/20/2015. (nr, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
INTERLINK GROUP CORP. USA, INC.,
Civil Action No. 12-6179 (JBC)
AMERICAN TRADE AND FINANCIAL
CORP., et al.,
FINDINGS OF FACT
CONCLUSIONS OF LAW
CLARK, United States Magistrate Judge
Plaintiff Interlink Corporation (“Plaintiff” or “Interlink”), a privately-held New Jersey
Corporation, brought this action against Defendants, American Trade and Financial Corporation
(“ATFC”), a Connecticut corporation, and Anatoli Timokhine (“Timokhine”), ATFC’s President
(collectively “Defendants”), seeking damages for breach of contract (Count I) and breach of
fiduciary duties (Count III).1 See Compl., Dkt. No. 1. Defendants filed counterclaims against
The Complaint originally stated Four Counts: Breach of Contract (Count I); Injunctive Relief
(Count II); Breach of Fiduciary Duties (Count III); and Tortious Interference with Business
Relations and Contracts (Count IV). The Honorable Faith S. Hochberg, U.S.D.J., denied
Plaintiff’s request for injunctive relief. See Order and Opinion, Dkt. No. 33. Further, in its
Opposition to Defendants’ Motion for Summary Judgment, Interlink withdrew its claim for
Interlink for breach of contract (Counts I, II, VII), unjust enrichment (Count III), promissory
estoppel (Counts IV, VIII), declaratory judgment (Count V), and tortious interference with
contractual relations (Count VI). See Am. Countercl., Dkt. No. 49. Defendants also filed a Third
Party Complaint against Alexander Karpman (“Karpman”), president of Interlink, seeking
damages for breach of fiduciary duty (Count I), fraudulent misrepresentation (Count II), and
tortious interference with contractual relations (Count III). See Third Party Compl., Dkt. No. 32.
This Court has subject matter jurisdiction under 28 U.S.C. § 1332(a)(2) as diversity of
citizenship exists between the parties and the amount in controversy exceeds $75,000. See Final
Pretrial Order (“FPO”), dated March 11, 2014, §1, Dkt. No. 80.
The parties consented to jurisdiction of the Undersigned, United States Magistrate Judge
James B. Clark, III, to resolve the case. See 28 U.S.C. § 636(c); Dkt. No. 82. A three-day bench
trial was conducted by the Undersigned on August 4, 2014 through August 6, 2014. The parties
presented testimony and exhibits, examined and cross-examined three witnesses, and argued their
respective cases.2 One witness, Dr. Jerald Udinsky (“Udinsky”), Plaintiff’s expert witness on
damages, was not available to be deposed by Defendants before the trial or appear at the trial. The
parties provided the Court the transcripts of Udinsky’s examination and cross-examination for
consideration. Based upon the trial record and stipulations of the parties in the Final Pretrial Order,
Tortious Interference with Business Relations and Contracts (Count IV). See Statement of
Material Facts in Opposition, Brief in Opposition, at 1, n.1, Dkt. No. 66-2.
The Court heard testimony from the following individuals:
1. Anatoli Timokhine, Defendant, individual and as president of ATFC;
2. Eddy Slick, Director of Sales for Keith Smith Corporation, a company that contracted with
both Interlink and ATFC at various points; and
3. Alexander Karpman, Third Party Defendant, individual and as president of Interlink.
the Court makes the following findings of fact and conclusions of law pursuant to Fed. R. Civ. P.
FINDINGS OF FACT3
The underlying litigation stems from a business venture undertaken by Interlink,
through its president, Karpman, and ATFC, through its president, Timokhine. See Dkt. No. 80,
FPO, “Stipulation of Facts” (“SOF”), §3, No. 11; Timokhine Test.; Karpman Test.
Prior to his emigration to the United States in 1995, Karpman went to school and
worked in Russia. Karpman Test.
Karpman testified that while working in a remote section of Russia, he developed
the process and business of shipping live food products into the region. Karpman Test.
In 1998, Karpman formed Interlink, a privately-held New Jersey corporation, to
export various goods, including equipment and food products to Russia and former Soviet Union
countries (“CIS countries”).4 SOF §3, No. 1; Karpman Test. Interlink’s personnel is limited,
consisting solely of Karpman as president, and other officers of the company. Interlink has at least
Since the parties have the transcripts of the proceedings, the Court will refer only generally to
the testimony of various parties where the facts appear not in dispute. The Court will identify page
and/or line numbers where necessary. The testimony of Alexander Karpman is referenced as
“Karpman Test.” The testimony of Anatoli Timokhine is referenced as “Timokhine Test.” The
testimony of Eddy Slick, representative of Keith Smith, Inc., is referenced as “Slick Test.” There
are three transcripts from the trial: (1) Volume I, dated August 4, 2014, Dkt. No. 117 (“Vol. I”);
(2) Volume II, dated August 5, 2014, Dkt. No. 118 (“Vol. II”); and (3) Volume III, dated August
6, 2014, Dkt. No. 119 (“Vol. III”). Any specific references to testimony in the transcript will be
designated as follows: “Timokhine Test, Vol. I, Page number:Line number”.
According to the parties, these countries include Ukraine, Kazakhstan, Byelorussia, Uzbekistan,
Azerbaidzhan, Georgia, Armenia, Turkmenia, Moldavia, Tadzhikistan, and Kirgizia. See Opinion
on Summary Judgment Motions, at 3, n.2, Dkt. No. 100.
one other member working for it in Russia who engages with Russian businesses. Karpman Test.
Karpman testified that in the past he had retained lawyers to work for Interlink. Karpman Test.
In 2003, Karpman became an American citizen. Karpman Test.
Defendant Timokhine was also educated in Russia and worked there for a time.
Timokhine Test. Timokhine graduated from the Moscow Finance Institute in 1974 with a degree
in international finance and business. SOF §3, No. 5; Timokhine Test. He worked with several
international banks and financial institutions where he gained experience in the field of
international trade and project finance. SOF §3, No. 6; Timokhine Test. Timokhine testified that
his background was in international finance, and that he did not have any legal training. SOF §3,
No. 8; Timokhine Test.
In 1991, Timokhine came to the United States, where he learned English as a third
language, and worked at various financial institutions. SOF §3, Nos. 7, 9; Timokhine Test.
In 1999, Timokhine founded ATFC, a Connecticut corporation. SOF §3, Nos. 3,
10; Timokhine Test. Timokhine is ATFC’s president and sole principal. SOF §3, No. 4;
Timokhine Test. In 2007, Timokhine became an American citizen. Timokhine Test.
B. Egg Shipping Business
As both parties testified, Karpman and Timokhine are distant relatives of some
relation. Karpman Test.; Timokhine Test.
In 2004, Karpman and Timokhine, via their respective companies, Interlink and
ATFC, entered into a business relationship. SOF §3, No. 11; Timokhine Test; Karpman Test.
In 2005, Interlink and ATFC began a joint project to export boiler hatching eggs –
eggs used for meat production – to Russia and CIS countries. SOF §3, No. 11. At the initiation
of the egg shipping business, the parties orally agreed to split the profits of the business equally at
50% to each party. SOF §3, No. 11; Timokhine Test.; Karpman Test. The parties, however, did
not enter into a written contract memorializing their early business relationship, the duties of each
party, or the compensation agreement. Karpman Test., Vol. III, 449:22-451:2, 509:13-15, 515:24516:1; Timokhine Test., Vol. I, 172:6-8, 173:14-19.
The parties agreed that Interlink would be the face of the egg shipping business.
Timokhine Test. Interlink contracted with both U.S.-based egg suppliers and Russian or CIS
country-based chicken producers. SOF §3, Nos. 12, 13; Timokhine Test. Interlink would purchase
broiler hatching eggs from United States suppliers, take custody of the eggs, and then arrange for
their overseas transport and delivery in Russia or other CIS countries. Karpman Test., Vol. III,
447:1-448:12; Timokhine Test., Vol. I, 32:25-33:3. As the face of the operation, Interlink was the
named party in all contracts from purchasing from U.S.-based producers through transportation to
Russian and CIS purchasers. SOF §3, Nos. 12, 13; Karpman Test.; Timokhine Test.
ATFC and Timokhine were active participants in the egg shipping business.
Timokhine Test.; Karpman Test. Timokhine was involved to varying degrees in negotiations with
U.S. suppliers, with the drafting of purchase and exclusivity agreements, veterinarian clearance
processing, the keeping of Interlink’s business documents, and management of Interlink’s
bookkeeping and finances. Timokhine Test.; Karpman Test.
The parties also agreed that Timokhine would have the title of Chief Financial
Officer in order to more easily represent the Interlink-ATFC efforts, but that he would receive no
additional compensation for the title. SOF §3, No. 11; Timokhine Test.; Karpman Test.
Karpman testified that he personally conducted all negotiations related to
transportation of the eggs from the United States to overseas. Karpman Test. At times, it appears
that both Timokhine and Karpman were involved in negotiations. Timokhine Test., Vol. I, 40:2224, 173:12-13; Karpman Test., Vol. III, 390:1-10, 465:17 to 466:10.
Timokhine also testified that all issues were discussed jointly and approved jointly.
Timokhine Test., Vol. I, 41:17-22. Timokhine explained that the parties realized that “each party
brings to the project their own experience, their own knowledge their own capabilities, their own
knowledge and their own capabilities and each party will do the best of – the best that each party
could do.” Timokhine Test., Vol. I, 42:11-15.
C. Coal Business
In or about December 2008, ATFC and Interlink agreed to purchase 3000 tons of
coal to sell in Poland and to split the proceeds of those sales equally. No agreement to sell and
split proceeds from a coal sale appears in any of the trial exhibits. The only evidence submitted
on the coal business was the parties’ testimony. Karpman testified that about 2000 tons of the coal
washed into a river resulting from unexpected and catastrophic flooding, and that there were no
proceeds—insurance or otherwise—from the lost coal. Karpman Test., Vol. III, 510:23-512:7. At
trial, Timokhine testified that he was unsure as to the quantity of coal that ATFC had even invested
in. Timokhine Test., Vol. II, 338:1-15. Timokhine also testified that he does not believe
Karpman’s versions of events and that he could “make some other suppositions” as to what
happened to the coal, but he provided no proof as to his suspicions. Timokhine Test., Vol. II,
D. Exclusivity Agreements
At issue here are Exclusivity Agreements (also called “Exclusivity Letters”) drafted
by Timokhine, reviewed by Karpman, and used by Interlink in contracts with U.S.-based egg
suppliers. The Exclusivity Agreements were separate documents, signed and executed by the egg
suppliers and Interlink that established an exclusive relationship between the supplier and Interlink
so long as Interlink purchased a stated quantity of eggs per year. Karpman Test.; Timokhine Test.;
see also Pl.’s Ex. 3. The Exclusivity Agreements set out the various conditions of the relationship,
obligations of each party, and featured a provision calling for exclusivity of unlimited duration.
See, e.g., Pl.’s Ex. 3.
The parties raised issues relating to exclusivity provisions with three U.S.-based
suppliers: Morris Hatchery, Inc. (“Morris Hatchery”), CWT Farms International, Inc. (“CWT”),
and Keith Smith, Inc. (“Keith Smith”).
The exclusivity provision in the Morris Hatchery Agreement reads: “The terms of
this exclusivity letter will be valid for unlimited period of time as long as Interlink honors its
obligations to buy from MHI [Morris Hatchery] at least 1.0 million broiler hatching eggs per year
on the terms indicated above.” Pl.’s Ex. 3. There are three Exclusivity Agreements with Morris
Hatchery. The first is dated January 3, 2007. Id. The second is an amendment to the 2007
agreement, expanding the territory covered by exclusivity provision. See Defs.’ Ex. 565. The
third version, dated October 27, 2008, signed by Karpman, reduced the quantity of eggs to be
purchased by Interlink from 1.0 million to .5 million. See Defs.’ Ex. 567.
The duration provisions in the CWT and Keith Smith Exclusivity Agreements use
similar language and have the same unlimited duration term. The CWT Agreement, dated
November 15, 2005, states: “These exclusive relations between CWT and Interlink will be valid
for unlimited period of time and can be terminate [sic] only based on the mutual agreement
between the CWT and Interlink.” Pl.’s Ex. 1. The Keith Smith Agreement, dated August 19,
2009, states: “These exclusive relations between Keith Smith and Interlink will be valid for
unlimited period of time and can be terminated by either party with sixty (60) days’ notice in
writing to the other party.” Pl.’s Ex. 14.
Timokhine testified that he drafted the Exclusivity Agreements, including the
unlimited duration term, upon instruction from and with approval by Karpman. Timokhine Test.
at Vol. I, 175:23-179:8. Karpman testified that the unlimited duration term would benefit Interlink.
Karpman Test. Karpman and Timokhine testified that the Exclusivity Agreements were drafted,
signed, and put into effect without consultation by a lawyer until after ATFC and Timokhine left
the egg shipping business. Karpman Test.; Timokhine Test.
Karpman also testified that Timokhine never held himself out to be a lawyer or to
have legal training. See Karpman Test., Vol. III, 444:16-23; Timokhine Test., Vol. I, 176:3-6.
Timokhine signed the November 2005 CWT Agreement and the August 2009 Keith
Smith Agreement on behalf of Interlink. Pl.’s Exs. 1, 14; Timokhine Test. Karpman was involved
in the negotiations with Morris Hatchery and signed the January 2007 Agreement with Morris
Hatchery, the November 2007 Amendment to that agreement, and the 2008 Morris Hatchery
Agreement. See Def.’s Exs. 508, 565, 567; Karpman Test.
On or about August 28, 2008, CWT filed a Notice and Demand for Arbitration on
Interlink. See Defs.’ Ex. 592. CWT alleged that Interlink had violated terms of the parties’
purchase agreements. See id. Interlink counterclaimed for violation of the parties’ exclusivity
agreement. See id.
On June 4, 2009, the arbitration panel issued its Final Award on Arbitration, and
found the exclusivity agreement enforceable, but the unlimited duration term of the exclusivity
agreement to be unreasonable and unenforceable. See id. The panel limited the exclusivity period
to January 23, 2010, one year past the termination of the parties’ business relationship. See id.
On June 23, 2009, Interlink filed a petition to vacate the arbitration award in the
United States District Court for the District of New Jersey, arguing that restrictive covenants of
unlimited duration in the Exclusivity Agreement were not unreasonable if other conditions were
met. See id. Karpman testified that the District Court upheld the arbitration panel’s decision that
the provision was invalid. Karpman Test., Vol. III, 472:1-3, 476:2. Karpman testified that during
this arbitration he finally learned how the United States treats exclusivity agreements that contain
terms of unlimited duration. Karpman Test., Vol. III, 476:3-15.
b. Morris Hatchery and Florida Lawsuit
Interlink and Morris Hatchery entered into an exclusive business relationship, with
a similar Exclusivity Agreement with the same unlimited duration term as in the CWT agreement.
The original, as quoted above, was signed in January of 2007. SOF, §3, No. 14. Again, on or
about November 27, 2007, an addendum to the 2007 agreement was entered into, expanding the
territory covered by exclusivity provision to Ukraine, except for one company. See Defs.’ Ex.
565. At the time of the negotiation for the amendment, the company was unknown; it was later
revealed to be Agro-Oven, a company Interlink had tried unsuccessfully to contract with directly.
Karpman testified that he was involved in the negotiations and signature of the 2007
Amendment, but it was Timokhine who again drafted the relevant documents. Karpman Test.,
Vol. III, 466:1-10.
As noted, supra, the third version, dated October 27, 2008, signed by Karpman,
reduced the quantity of eggs to be purchased by Interlink from 1.0 million to .5 million. See Defs.’
On June 28, 2010, Timokhine sent an email to Ed Morris to begin discussions on
contract renewals. Timokhine Test.; Pl.’s Ex. 17. The email was broken down into three sections:
(1) the Exclusivity Agreement; (2) the Purchase Agreement; and (3) the Egg Placement
Agreement. Id. Despite the Exclusivity Letter’s unlimited duration term, under the section on
Exclusivity Agreement, Timokhine stated: “[t]he exclusivity letter regarding the broiler hatching
eggs will expire at the end of this year and we would like to propose [sic] you to extend the validity
of this agreement.” Id. Timokhine testified that he had made a mistake, copying and pasting the
language from the Purchase Agreement section, which had an expiration date, and sent the email
without correcting the mistake.5 Timokhine Test., Vol. I, 69:1-6.
In late 2010, Morris Hatchery filed for declaratory judgment in the United States
District Court for the Southern District of Florida to determine that the Exclusivity Agreement
expired at the end of 2010. SOF §3, No. 16; Pl.’s Ex. 29. Interlink alleged Morris Hatchery
violated the terms of the Exclusivity Agreement and counterclaimed for breach of contract. SOF
§3, No. 18. The litigation was in Interlink’s name alone.
Timokhine and Karpman testified that they both flew to Florida for the trial, and
that Timokhine was a witness in the trial. Timokhine Test.; Karpman Test. They each paid their
own expenses, including airfare, hotels, and other costs. Timokhine Test.; Karpman Test.
The Purchase Agreement section states: “The purchase agreement regarding the broiler hatching
eggs will expire at the end of this year and we would like to propose [sic] you to extend the validity
of the agreement.” Pl.’s Ex. 17.
Timokhine testified that he and Karpman had agreed, pursuant to their original
agreement, to cover their own costs and split proceeds of the litigation at 50% and 50%.
Timokhine Test., Vol. II, 193:10-18. Timokhine testified that following the oral agreement with
Karpman, Timokhine memorialized their agreement and emailed it to Karpman and Interlink’s
litigation counsel, Alan L. Frank Law Associates, P.C. Defs.’ Ex. 519; Timokhine Test., Vol. II,
202:23-203:16. Throughout the litigation, Alan Frank’s office, including Alan Frank himself, sent
correspondences to Karpman and Timokhine, including a settlement offer, invoice for services and
costs, and updates on the status of the case. See, e.g., Defs.’ Exs. 542, 543. One letter included
an invoice for the amount of $12,596.01. Defs.’ Ex. 542. Timokhine testified that under his
understanding of the payment agreement, he was to pay half of the costs, and sent a check for
$6,298, which was cashed by Alan Frank’s office. See Defs.’ Ex. 512; Timokhine Test. Interlink
also paid half of the invoice by check for $6,298. See Defs.’ Ex. 521.
On a separate occasion, Alan Frank sent an invoice for an additional $40,000. As
before, Timokhine sent a check for half of the costs. Defs.’ Exs. 529, 530. Interlink, however,
covered the $40,000 and returned/reimbursed the amount back to ATFC and Timokhine.
Timokhine Test., Vol. II, 214:10-17. Karpman testified that the parties had no agreement to share
any of the proceeds of the Florida litigation and that Interlink paid for the litigation, after
reimbursing Timokhine for any monies paid. Karpman Test., Vol. III, 412:2-413:4.
In May 2012, the jury returned a verdict in favor of Interlink on the breach of
contract counterclaim and awarded a judgment of $2,066,711.02. SOF §3, No. 21. The judgment
was paid to Interlink. Id.
Prior to the return of the jury’s verdict, however, the Court granted summary
judgment for Morris Hatchery, finding that the unlimited duration term of the exclusivity provision
was invalid, and deemed the exclusivity provision expired as of December 31, 2010. Pl.’s Ex. 29,
at 6-11; Karpman Test., Vol. III, 380:2-16. Interlink did not appeal the summary judgment
decision or the jury award. Karpman Test.
c. Keith Smith, Inc.
In 2007, Interlink began to purchase broiler hatching eggs from Keith Smith Inc.
(“Keith Smith”). SOF §3, No. 22.
On August 19, 2009, the parties entered into an exclusivity agreement, which like
the Morris Hatchery and CWT Exclusivity Agreements, required Keith Smith to have exclusive
dealings with Interlink provided Interlink purchased a certain quantity of eggs per year. SOF §3,
Nos. 23-24; Pl.’s Ex. 14.
On February 7, 2012, Eddy Slick, Director of Sales for Keith Smith, emailed
Timokhine to terminate the exclusivity contract with Interlink because Interlink had failed to place
sufficient orders to meet the minimum annual purchase volume of broiler hatching eggs from Keith
Smith for 2011. Pl.’s Exs. No. 19; Slick Test., Vol. II, 271:21-272:11.
Timokhine wrote to Eddy Slick and Bud West, among others, in attempts to
rekindle the relationship. See Pl.’s Ex. 18. On February 15, 2012, Timokhine sent an email to
Bud West indicating interest by a Russian buyer for five to six million eggs in two months, and
over seventy million eggs over the course of the year, which West indicated Keith Smith would
consider. Pl.’s Ex. 20. Eddy Slick testified that based on this email, he believed Timokhine “was
reaching out from his new company which is referenced in the e-mail, U.S.A. ATFC and would
not be working with Interlink.” Slick Test., Vol. II, 275:2-4.
On March 30, 2012, Timokhine emailed Bud West to inform him that he was
leaving the business with Interlink. See Pl.’s Ex. 27. Timokhine informed West of his new contact
information, including his email address, and concluded the email with the following: “Don’t
hesitate to contact me if you need any help and assistance in developing your poultry business in
Russia. I hope that good business and personal relations we established last years [sic] will be a
strong foundation for our future productive and mutually beneficial cooperation.” Id.
Following Timokhine’s departure from the Interlink egg shipping business,
Interlink and Keith Smith re-engaged in discussions to continue business. Karpman testified that
Keith Smith and Interlink discussed a new agreement in August 2012. See Karpman Test. On
September 5, 2012, the parties signed and dated a new Exclusivity Agreement, which itself was
dated August 2, 2012. See Defs.’ Ex. 524; SOF §3, No. 28.
E. Dissolution of the Interlink-ATFC Egg Shipping Business
In April 2011, Karpman sought to reduce ATFC’s and Timokhine’s share of the
egg shipping business profits. See Pl.’s Exs. 23, 61, 75. Karpman testified that he informed
Timokhine that he was changing the ratio from a 50% per party profit-sharing arrangement, to
70% to Interlink and 30% to ATFC. Karpman Test., Vol. III, 393:3-7. The parties would continue
to cover their own expenses and ATFC was to take on an additional share of office rent and
communication expenses. See Pl.’s Ex. 61; see also Karpman Test; Timokhine Test. Their roles
in the business would remain the same. Karpman Test.; Timokhine Test. Karpman testified that
he reduced ATFC’s share of the profits because of Timokhine’s poor job performance, noting in
particular the problems with the Exclusivity Agreements. Karpman Test., Vol. II, 368:18-371:13; 393:3-394:15. The new profit-sharing formula was proposed as an ultimatum: either Timokhine
agreed to the reduced profit-sharing or Timokhine would leave the business. Timokhine Test.;
Karpman Test. Karpman testified that the conversation took place at the Interlink office and that
Timokhine called the next day to accept these changes. Karpman Test., Vol. III, 395:5-9; 397:2.
Karpman also testified that Timokhine continued to work in the egg shipping business, and that
his continued participation meant that he accepted the new 70/30 split agreement. Karpman Test.
Timokhine testified that he did not accept the 70/30 split and in later emails
discussed his rejection of the compensation reduction at the time it was proposed. Pl.’s Exs. 23,
61, 75. Timokhine further testified that he believed Karpman had accepted his refusal of the 70/30
split, and the parties continued operating under the original 50/50 profit sharing through 2011.
Timokhine Test., Vol. II, 226:1-15.
In late 2011 and early 2012, the business relationship between Interlink and ATFC
deteriorated further. Timokhine testified that the relationship declined because Karpman was
refusing to share in the profits in accordance with their 50/50 profit sharing agreement. Timokhine
On March 8, 2012, Timokhine sent an email outlining his duties and participation
in the business and outlined several options for payments and business wrap up. Pl.’s Ex. 23. On
March 31, 2012, the parties terminated their working relationship and stopped their collective egg
shipping business efforts. SOF §3, No. 25.
F. ATFC-Keith Smith Business Agreement
As noted previously, Timokhine testified that on March 30, 2012, as the Interlink-
ATFC business relationship was winding up, he sent an email to Keith Smith, notifying them of
his departure from the Interlink business and stating: “Don’t hesitate to contact me if you need any
help and assistance in developing your poultry business in Russia. I hope that good business and
personal relations we established last years [sic] will be a strong foundation for our future
productive and mutually beneficial cooperation.” See Pl.’s Ex. 27.
Following Timokhine’s departure from Interlink, in April 2012, Keith Smith and
ATFC entered into their own business relationship with Keith Smith, hiring ATFC for consulting
and brokerage services to sell eggs directly to customers in Russia and the CIS Countries.
Timokhine Test.; see also Pl.’s Exs. 28, 39 (the “Keith Smith-ATFC Agreement”). The Keith
Smith-ATFC Agreement was signed on April 25, 2012. Pl.’s Ex. 39.
The Keith Smith-ATFC business ramped up quickly.
On April 26, 2012,
Timokhine sent an email announcing Keith Smith’s first ATFC client, a Russian company called
ZAO “Belaya Ptica” and their subsidiary ZAO “Zagorye,” referred to as White Bird. See Pl.’s Ex.
40. The email also discussed some of the logistics of farm visits. See id. Throughout June,
members of Keith Smith and Timokhine emailed regarding various aspects of a potential
agreement between White Bird and Keith Smith. See Pl.’s Exs. 48, 49, 50. Timokhine also sought
Keith Smith’s help in sending out letters of introduction to other Russian meat producers. See
Pl.’s Exs. 51, 56, 57, 59. In late July, Keith Smith executed a contract to sell eggs to White Bird.
Defs.’ Ex. 573.
The Keith-Smith-ATFC agreement was short-lived.
On August 3, 2012,
Timokhine sent an email to Keith Smith indicating problems with the signature and number of
executed contracts with White Bird. See Pl.’s Ex. 65.
On August 7, 2012, Timokhine wrote an email to Keith Smith in which Timokhine
states “I am not interesting [sic] to continue these activity [sic] without your support and would
like to propose to cancel the agreement we have.” Pl.’s Ex. 69.
On August 17, 2012, Timokhine emailed Keith Smith seeking confirmation of the
end of their business relationship and requesting permission to contact those businesses to whom
he had sent letters of introduction to inform them of the cancellation of the Keith Smith-ATFC
business relationship. See Pl.’s Ex. 70. Timokhine wrote: “The agreement between Keith Smith
Company, Inc. and American Trade and Financial Corporation dated April 25, 2012 is cancelled
as of September 17, 2012 (one month from your today notice).” Id.
Timokhine sent several follow up emails regarding the cancellation letters on
August 20, 21 and 31. See Pl.’s Exs. 71-73; Timokhine Test. After these emails, Timokhine did
not have any further business-related communications with Keith Smith. Timokhine Test., Vol. I,
Eddy Slick also testified that Keith Smith never paid ATFC any money because
there was never any shipment of goods. Slick Test., Vol. II, 312:15-20.
G. The Non-Compete Agreement
At some point between May 2012 and early June 2012, Karpman forwarded
Timokhine a draft of a Non-Compete Agreement (“NCA”). Karpman Test; Timokhine Test.
In an email response, Timokhine outlined what he felt had been his input to the
business and expenses, and he proposed a final resolution to their relationship which would include
his leaving the company as of April 1, 2012, after certain conditions were met, including the proper
distribution of profits from the 2010, 2011, and partial 2012 years, and the receipt by him of 50%
of the monies due from the Morris lawsuit. Pl.’s Ex. 61; Timokhine Test.
Despite his response, on August 3, 2013, Timokhine signed the NCA. See Pl.’s Ex.
67; Defs.’ Ex. 515. The NCA incorporates three restrictions: non-competition, non-solicitation,
and non-disclosure. In relevant part, the NCA reads:
1.1 In view of the fact that the AGENT’s work for the Company has
brought the AGENT into close contact with many confidential
affairs of the COMPANY not readily available to the public, the
AGENT covenants and agrees that the AGENT will not at any time
use for the AGENT’s personal benefit (including corporate or
related parties as defined in the Preamble above) or for the direct or
indirect benefit of any third party or disclose to an unauthorized
person, firm or corporation any information, documents or materials
acquired by the AGENT through employment by the COMPANY,
including without limitation, information, whether oral, written or
electronic, concerning the business or technology of the
COMPANY including but not limited to, the COMPANY’s
customer and vendor or suppliers lists, price data, its relations with
employees, contactors, vendors, clients or agents, its manner of
operation or its inventions, designs, plans, processes or other
proprietary information or trade secrets.
2.1 AGENT agrees that during the period of FIVE YEARS (5 years)
commencing with the signing of this agreement he will not, without
the COMPANY’s prior express written consent, engage in any (parttime or full-time) employment, consulting or other business which
is directly or indirectly connected with (other than by virtue of
ownership of less than 2% of the outstanding capital stock of any
class of publically-traded company) any business that is a client of
the COMPANY and for which the AGENT performed, bought or
sold services on the COMPANY’s behalf or which is in competition
with the COMPANY.
3.1 AGENT agrees the AGENT will not, during the FIVE YEARS
(5 years) commencing with the signing of this agreement, solicit,
service, do business with or sell to any customer or client of the
COMPANY that purchased any product or service from the
COMPANY for which AGENT performed or sold services on the
Section 4 sets forth the consideration for the NCA, stating:
AGENT further acknowledges that the restrictive covenants set
forth in this Agreement are reasonably necessary for the protection
of the COMPANY’s legitimate business interests. Since the
AGENT is leaving a business relationship with the COMPANY,
AGENT agrees to accept the sum of 780,504.75 ($
) and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, as sufficient and due consideration for the faithful
performance of his obligations under this agreement.
Id. The NCA also included a clause that awards “all reasonable legal fees and expenses” incurred
successfully in enforcing the covenants and terms of the NCA. Id.
Timokhine testified that he understood the NCA to be an ultimatum – that the
contract was not for negotiation and that he could not make alterations. Timokhine Test. Further,
Timokhine testified that he felt pressured into the accepting the agreement, as Karpman knew he
was in need of money for his expenses and to cover the costs of his wife’s medical care. Timokhine
Karpman testified that the amount of consideration—$780,504.76—was calculated
and chosen by Timokhine. Karpman Test., Vol. III, 516:8-18. Karpman further testified that if it
were up to him, the amount of consideration would have only been $50,000. Karpman Test., Vol.
CONCLUSIONS OF LAW
A. Plaintiff’s Claim for Breach of the Non-Compete Agreement (Plaintiff’s Complaint,
The first question presented to this Court is whether Timokhine and/or ATFC breached the
NCA. In order to resolve any of the claims or counterclaims currently before the Court, however,
the Court must first determine whether the NCA is a valid contract.
a. Validity of the NCA
To prove the existence of a valid contract between the parties, the plaintiff must show:
“mutual assent, consideration, legality of object, capacity of the parties and formality of
memorialization.” Cohn v. Fisher, 287 A.2d 222, 224 (N.J. Super. Ct. App. Div. 1972). The
validity of a contract, including a non-compete agreement, “rests in part upon the existence of
good and sufficient consideration.” Hogan v. Bergen Brunswig Corp., 378 A.2d 1164, 1167 (N.J.
Super. Ct. App. Div. 1977) (citing A. Hollander & Son v. Imperial Fur Blending Corp., 2 N.J. 235,
249 (1949) (further citations omitted)). An agreement will fail for lack of consideration where the
purported consideration for the agreement arises out of a preexisting legal duty. Hyman v. WM
Fin. Servs., Inc., No. 07-3497, 2008 WL 1924879, at *3 (D.N.J. Apr. 29, 2008); Berel Co. v. Sencit
F/G McKinley Assocs., 710 F. Supp. 530, 536 (D.N.J. 1989) (citing Restatement (Second) of
Contracts § 73 & Cmt. (1981)); Gray v. Martino, 103 A. 24, 24 (N.J. 1918). Thus, where a
defendant’s alleged obligation to pay plaintiff under a contract is already required by an earlier
duty, there is insufficient consideration for the contract. Shakib v. Back Bay Rest. Grp., Inc., No.
10-4564, 2011 WL 4594654 (D.N.J. Sept. 30, 2011); U.S. Land Res., LP v. JDI Realty LLC, No.
08-5162, 2009 WL 2488316 (D.N.J. Aug. 12, 2009); Merlo v. Fed. Exp. Corp., No. 07-4311, 2010
WL 2326577 (D.N.J. June 7, 2010).
New consideration need not be large sums or dramatic promises. The Restatement
(Second) of Contracts, §73, notes that, with respect to contractual duties, “[s]light variations of
circumstance are commonly held to take a case out of the rule, particularly where the parties have
made an equitable adjustment in the course of performance of a continuing contract.” Id. Thus,
“similar performance is consideration if it differs from what was required by the duty in a way
which reflects more than a pretense of bargain.” Id.
On August 3, 2012, the parties executed the NCA. See Pl.’s Ex. 67; Defs.’ Ex. 515.
Interlink asserts that it paid Timokhine approximately $780,504.75 as consideration for his signing
the NCA. Defendants assert that Plaintiff was under a preexisting duty to pay the $780,504.75
based on the parties’ oral profit-sharing agreement. Interlink, on the other hand, claims that it
owed nothing under a preexisting legal duty, and the $780,504.75 was only consideration for the
NCA. Based upon the trial testimony of the principals, it is certainly clear that they had widely
divergent views regarding their economic relationship in 2012.
The Court finds that the
$780,504.75 paid to Defendant was, at least in part, consideration for the NCA. The Court also
finds, however, that Interlink had a preexisting duty to pay some amount of money under the
party’s profit-sharing agreement, but the question of how much poses a problem. Karpman and
Timokhine testified to opposite effects on the amount owed under the profit-sharing agreement.
Karpman argued for a 70/30 split, with no share of the proceeds from the Florida lawsuit.
Timokhine argued for a 50/50 split, including the Florida lawsuit proceeds. Both parties testified
to accepting his own proposal and rejecting the other.
As previously discussed, a valid contract requires mutual assent. Cohn, 287 A.2d at 224.
Clearly, the parties mutually agreed to split profits to some degree. Moreover, both parties agreed
to the NCA, and both agreed that a payment of $780,504.75 would be made to Timokhine.
Timokhine complained of not receiving monies from the 2011 and 2012 years plus monies from
the lawsuit, but he still agreed to accept the amount of $780,504.75 and he did sign the NCA.
Karpman, although he disputes owing any monies to Timokhine and testified that he felt he should
have only had to pay $50,000 for the NCA, nevertheless agreed to pay $780,504.75 to Timokhine.
Given all of the testimony and all of the circumstances surrounding the parties’ relationship at that
time, it appears most likely to the Court that the payment to Timokhine of $780,504.75 and the
signing of the NCA represented an effort by both sides to come to some sort of overall agreement
concerning all of their claims against each other and to finally part ways. Thus, the Court finds
that the $780,504.75 represents both consideration for the NCA and reimbursement of the monies
owed under the egg shipping business. The Court therefore concludes that the $780,504.75
constitutes valid consideration for both the NCA and for the discharge of any remaining legal
obligations under the profit-sharing agreement. As a result, the NCA, at least preliminarily, see
infra subsection b, constitutes a valid agreement.6
b. Scope of the NCA
Defendants argue that even if the $780,504.75 is valid consideration for the NCA, the NCA
is unduly broad as to time and scope and thus void as against public policy. Restrictive covenants
in employment contracts are enforceable under New Jersey law if they (1) protect a legitimate
interest of the employer; (2) impose no undue hardship on the employee; and (3) are not injurious
to the public. See Solari Indus., Inc. v. Malady, 264 A.2d 53, 56 (N.J. 1970). The court must
assess an agreement’s reasonableness on a case-by-case basis. Pierson v. Med. Health Ctrs., P.A.,
869 A.2d 901, 904 (N.J. 2005).
“A court therefore may not presume that a temporal or
geographical limitation deemed reasonable in one case is necessarily reasonable in another.”
Truong, LLC v. Tran, No. A-5752-11T1, 2013 N.J. Super. Unpub. LEXIS 64, 2013 WL 85368, at
*8 (N.J. Super. Ct. App. Div. Jan. 9, 2013).
In determining the reasonableness of an agreement’s limitations, courts also consider three
additional factors in determining whether a restrictive covenant is overbroad: “its duration, the
geographic limits, and the scope of activities prohibited.” The Community Hosp. Grp., Inc. v.
More, 869 A.2d 884, 897 (N.J. 2005). “Each of those factors must be narrowly tailored to ensure
the covenant is no broader than necessary to protect the employer’s interests.” Id. However, where
a non-compete agreement seeks to impose overbroad restrictions, courts may disregard the
There has been a suggestion by Timokhine that he signed the NCA under duress because his wife
was sick and he needed money for her care. At trial, however, this suggestion was supported only
by one passing and rather unconvincing comment by Timokhine. Timokhine Test., Vol. II,
191:24-192:6. Timokhine made little effort at trial to explain why he did not have other funds to
devote to his wife’s care or to otherwise elaborate upon his claim of duress, and based upon the
evidence before it, the Court declines to invalidate the NCA on such a vague assertion.
covenant or give it complete or partial enforcement to the extent reasonable. See Cost Reduction
Solutions v. Durkin Grp., LLC, No. A-0046-07T2, 2008 WL 3905679, at *3 (N.J. Super. Ct. App.
Div. Aug. 22, 2008) (citing The Community Hosp. Grp., Inc., 869 A.2d at 897); Whitmyer Bros.,
Inc. v. Doyle, 274 A.2d 577, 580-81 (N.J. 1971). “Ordinarily, if a restrictive covenant is overly
broad or unreasonable, the Court may ‘limit . . . its application concerning its geographical area,
its period of enforceability, and its scope of activity,’ to make it reasonable.” Laidlaw, Inc. v.
Student Transp. of Am., 20 F. Supp. 2d 727, 757 (D.N.J. 1998) (quoting Coskey's Television &
Radio Sales and Serv., Inc. v. Foti, 602 A.2d 789, 793 (N.J. Super. Ct. App. Div. 1992); Karlin v.
Weinberg, 390 A.2d 1161, 1168 n.4 (N.J. 1978) (explaining that courts may “blue pencil” or
“compress or reduce the geographical areas or temporal extent of their impact so as to render the
The NCA prohibits Defendants, for a period of five years, from competing with Interlink
anywhere in the world, regardless of business area or industry, from engaging in any employment
or business with any Interlink client, supplier or any business that Interlink deems a competitor, or
soliciting any business with any Interlink customer, client, supplier or vendor. The Court finds
that some of these restrictions are overbroad and unreasonable. First, the Court finds that the
temporal limitation of five years is unreasonable and reduces that limitation to three years. Second,
the Court finds the lack of geographical restriction to be unreasonable and confines the noncompetition/non-solicitation portion of the NCA to clients doing business in Russia and CIS
countries. Finally, the Court limits the scope of the NCA to prohibit Defendants only from
competing and soliciting clients in the type of egg-shipping business that both Karpman and
Timokhine participated together in before their 2012 parting of ways. With these modifications in
place, the Court finds that the NCA is reasonable and enforceable.
c. Breach of NCA by Defendants
The Court now turns to whether, as Plaintiff alleges in Count I of its Complaint, Defendants
breached their obligations under the NCA. Dkt. No. 1, Compl., at ¶¶ 43-53. “To prevail on a
breach of contract claim under New Jersey law, a plaintiff must establish three elements: (1) the
existence of a valid contract between the parties; (2) failure of the defendant to perform its
obligations under the contract; and (3) a causal relationship between the breach and the plaintiff’s
alleged damages.” Sheet Metal Workers Int’l Ass’n Local Union No. 27, AFL-CIO v. E.P.
Donnelly, Inc., 737 F.3d 879, 900 (3d Cir. 2013) (citing Coyle v. Englander’s, 488 A.2d 1083,
1088 (N.J. Super. Ct. App. Div. 1985)); RNC Sys., Inc. v. Modern Tech. Grp., Inc., 861 F. Supp.
2d 436, 444-45 (D.N.J.) (finding that breach of contract “requires proof of three elements: (1) the
existence of a valid contract; (2) a breach of that contract; and (3) resulting damage to the
plaintiff.”); Murphy v. Implicito, 920 A.2d 678, 689 (N.J. Super. Ct. App. Div. 2007).
The Court finds that Plaintiff has failed to establish a breach of the NCA. Plaintiff’s
primary evidentiary items in support of this claim are the emails sent from Timokhine to Keith
Smith after Timokhine signed the NCA on August 3, 2012. The Court finds that these emails do
not constitute a breach of the NCA. The correspondences sent by Timokhine evidence a desire to
end the business relationship he had previously established with Keith Smith prior to signing the
NCA and discuss how Timokhine wished to send out letters indicating his removal from the egg
shipping industry. This is further corroborated by Keith Smith representative Eddy Slick who
testified that it was his understanding that the emails were intended to wind down any business
relations between ATFC and Keith Smith. See Slick Test., Vol. II, 311:11-15. Eddy Slick also
testified that Keith Smith never paid ATFC any money and that there was never any shipment of
See Slick Test., Vol. II, 312:15-20.
Further, the NCA does not require Timokhine to stop all communications. It does not
prevent Timokhine from protecting his personal and business reputation, nor does it require
disclosure of the NCA. The NCA prevents disclosure and use of Interlink’s information and
prevents Defendants’ employment and solicitation of business in the egg shipping industry.
Plaintiff did not present any evidence that indicates an attempt to solicit business or compete with
Interlink after the agreement was signed on August 3, 2012.7 The Court finds that Timokhine’s
actions were well within the confines of the NCA. Moreover, his actions in contacting Keith Smith
to effectuate the wind-down of his activities, which were not proscribed until the signing of the
NCA on August 3, 2012, do not constitute a breach of the NCA.
Finally, a demand letter from counsel, such as that from Timokhine’s counsel to Karpman’s
counsel a few months after the NCA was signed, even when the letter states the agreement is void
ab initio, is not in and of itself a breach of the NCA. See Sheet Metal Workers, 737 F.3d at 900
(finding breach of contract requires “failure of defendant to perform its obligations under
contract”). Timokhine testified that despite his belief that the NCA was void, he has always abided
by and continues to abide by the terms of the agreement. Plaintiff has not submitted any evidence
of Defendants’ participation in the egg shipping industry following the letter from Defendants’
counsel. Therefore, the Court finds that Plaintiff has received the benefit of its bargain and
Defendants did not breach the NCA.8
Plaintiff submitted one email sent by Timokhine on August 3, 2012 in which Timokhine
discusses the White Bird contract with Keith Smith. Pl.’s Ex. 65. This email was sent at
approximately 9:11 A.M. Timokhine, however, testified that he signed the NCA in the late
afternoon or evening of August 3, 2012. See Timokhine Test., Vol. I, 147:12-17. Thus, while
Timokhine had the draft of the NCA, he had not yet signed it, and the email cannot constitute a
breach of a contract as there was no assent to the agreement at that time.
Plaintiff also claims it is entitled to an award of attorneys’ fees based on the clear language in the
NCA. The NCA provides that “AGENT agrees that COMPANY is entitled to the cost of all
reasonable legal fees and expenses incurred in successfully enforcing the covenants contained
B. Defendants’ Counterclaims for Breach of Contract (Amended Counterclaim, Counts I,
II, and VII), Equitable Counterclaims for Unjust Enrichment (Amended Counterclaim,
Count III) and Promissory Estoppel (Amended Counterclaim, Counts IV and VIII), and
Counterclaim for Declaratory Judgment (Amended Counterclaim, Count V)
Defendants assert claims for breach of contract (Counterclaim Counts I and VII), unjust
enrichment (Counterclaim Count III), promissory estoppel (Counterclaim Counts IV and VIII),
and Declaratory Judgment (Counterclaim Count V) related to the egg shipping business.
First, with respect to the breach of contract claims, Defendants allege that Plaintiff did not
pay the monies due to Defendants per the parties’ oral profit-sharing agreement for profits from
the egg shipping business. As discussed above, the Court has found that the $780,504.75 paid
from Interlink to Defendants constitutes both the profits owed to Defendants pursuant to the egg
shipping business plus the consideration for the NCA. Thus, the Court finds that there is no breach
of contract by Plaintiff or Karpman of the profit-sharing agreement in the egg shipping business,
or at the very least, any breach that existed when Karpman refused to pay the money following
Timokhine’s exit from the business has been satisfied by the subsequent payment of the
With regard to Defendants’ unjust enrichment claim, under New Jersey law, a cause of
action for unjust enrichment requires proof that “[counterclaim] defendant received a benefit and
that retention of that benefit without payment would be unjust.” VRG Corp. v. GKN Realty Corp.,
135 N.J. 539, 554 (1994). “The most common circumstance for application of unjust enrichment
is when a plaintiff has not been paid despite having had a reasonable expectation of payment for
services performed or a benefit conferred.” County of Essex v. First Union Nat.’l Bank, 862 A.2d
herein.” Pl.’s Ex. 67, § 16 (emphasis added). Here, while the Plaintiff prevails on the claim that
the NCA is valid, the Court finds that there was no breach of the NCA by Defendants. Therefore,
Plaintiff has not succeeded in enforcing the NCA and is not entitled to attorneys’ fees.
1168, 1172 (N.J. Super. Ct. App. Div. 2004), aff’d in part and rev’d in part, 186 N.J. 46 (2006).
Here, the Court finds that Plaintiff did not receive a benefit without paying Defendants. The Court
has found that the $780,504.75 consists of both consideration for the NCA and satisfaction of the
remaining monies owed to Defendants under the profit-sharing agreement.
Defendants’ counterclaim for unjust enrichment fails.
Defendants’ counterclaim for promissory estoppel also fails. The elements of promissory
estoppel require the party to show that there has been “(1) a clear and definite promise; (2) made
with the expectation that the promise will [be relied on]; (3) reasonable reliance; and (4) definite
and substantial detriment.” Toll Bros., Inc. v. Bd. of Chosen Freeholders of the City of Burlington,
194 N.J. 223, 253 (2008). Based on the evidence before the Court, it is clear that the parties’
profit-sharing agreement was subject to change, and was far from clear and definite. Moreover, it
appears that Defendants profited from the parties’ split when Defendants received $780,504.75 as
consideration for the NCA and for its portion of the profits of the egg shipping business. Thus,
Defendants have also failed to show that they suffered a definite and substantial detriment, and
their claim for promissory estoppel must be denied.
Additionally, Defendants advance a counterclaim for a declaratory judgment “that the
[NCA] is unenforceable and is a nullity.” See Dkt. No. 49, Am. Countercl., Count V, ¶ 52. Given
that the Court has already concluded that the NCA, as modified, is a valid contract supported by
sufficient consideration, this request for a declaratory judgment to the contrary must be denied.
Defendants further seek damages for monies allegedly owed to them in connection with
the parties’ joint venture related to the coal business. Specifically, Defendants seek damages for
breach of contract (Counterclaim Count II), unjust enrichment (Counterclaim Count III), and
promissory estoppel (Counterclaim Count IV) relating to the coal business. In or about December
2008, ATFC and Interlink apparently agreed to purchase approximately 3000 tons of coal to sell
in Poland and then to split the proceeds of those sales equally. Defendants claim that Interlink and
Karpman breached this agreement because they failed to split these proceeds. No agreement to
sell and split proceeds from a coal sale appears in any of the trial exhibits. The only evidence
submitted on the coal business was the parties’ testimony. Karpman testified that about 2000 tons
of the coal washed into a river resulting from unexpected and catastrophic flooding, and that there
were no proceeds—insurance or otherwise—from the lost coal. Karpman Test., Vol. III, 510:23512:7. At trial, Timokhine testified that he was not even sure as to the quantity of coal that ATFC
had invested in. Timokhine Test., Vol. II, 338:1-15. He also testified that he does not believe
Karpman’s versions of events and that he could “make some other suppositions” as to what
happened to the lost coal. Timokhine Test., Vol. II, 338:9-339:1. Timokhine has failed to provide
any actual evidence to substantiate these claims and his speculation that Karpman is hiding the
truth about the coal is insufficient to sustain a claim for breach of contract, promissory estoppel,
or unjust enrichment. Accordingly, the Court finds that these Counterclaims fail.
C. Third Party Claim of Fraudulent Misrepresentation (Third Party Complaint, Count II)
Defendants assert a claim for fraudulent misrepresentation against Third-Party Defendant
Karpman for his personal role in keeping any monies due to Defendants from them. See Dkt. No.
32, Third Party Compl., Count II, ¶¶ 43-50; FPO, §7, ¶¶ 69-94. Under New Jersey law, the
elements of a fraudulent misrepresentation claim are: (1) defendant made a material
misrepresentation of a presently existing or past fact; (2) with knowledge of its falsity; and (3)
with the intent that plaintiff would rely thereon; ( 4) resulting in reasonable reliance; ( 5) to the
plaintiff’s detriment. Jewish Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619, 624-25 (1981). Because
the Court finds the NCA to be valid and the $780,504.75 to be both consideration for the NCA and
satisfaction of past due monies, the Court finds that Defendants have been paid and there was no
fraudulent misrepresentation relating to the NCA or payment of money owed under the profitsharing agreement.
D. Defendants’ Counterclaim of Tortious Interference against Interlink (Amended
Counterclaim, Count VI) and Third Party Defendant Alexander Karpman (Third Party
Complaint, Count III)
Defendants assert a claim against Interlink and Karpman, as a Third-Party Defendant, for
interfering with Defendants’ contract with Keith Smith after Defendants left the Interlink-ATFC
business. See Dkt. No. 49, Am. Countercl., Count VI, ¶¶ 55-61; Dkt. No. 32, Third Party Compl.,
Count III, ¶¶ 51-57. In Printing Mart-Morristown v. Sharp Elecs., 116 N.J. 739, 751-52 (1989),
the Court set forth the elements of a claim for tortious interference with contractual relations,
indicating that a party must prove (1) the existence of the contract (or the prospective economic
relationship); (2) interference which was intentional and with malice; (3) the loss of the contract
or prospective gain as a result of the interference; and (4) damages. Defendants allege that in
August of 2012, Karpman communicated with Keith Smith representatives and convinced them to
terminate their exclusivity agreement with ATFC. Dkt. No. 49, Am. Countercl., Count VI, ¶ 58.
However, Defendants offer precious little evidence to support their claim that Karpman engaged
in such conduct, and Timokhine himself testified that defendants terminated their own relationship
with Keith Smith upon his execution of the NCA. Defendants further predicate their claim of
tortious interference upon the invalidity of the NCA. See FPO, Defs.’ Contested Facts, §7, ¶ 62.
As previously discussed, the Court finds that the NCA is a valid, enforceable contract.
Accordingly, the Court finds that there was no tortious interference by Plaintiff with Defendants’
contract with Keith Smith. Because there is no finding of tortious interference by Interlink, there
can be no finding of tortious interference by Karpman.
E. Defendants’ Breach of Fiduciary Duties (Plaintiff’s Complaint, Count 3)
Plaintiff claims that ATFC and Timokhine stood in a fiduciary relationship to Interlink and
owed Interlink a duty to be careful, skillful, diligent and loyal in performance of Interlink’s
business. Dkt. No. 1, Compl., Count III, ¶ 73. Plaintiff further claims that ATFC and Timokhine
breached that fiduciary duty to Interlink when ATFC drafted an exclusivity agreement with a term
of unlimited duration between Interlink and Morris Hatchery. Id., at ¶ 74.
“In order to establish a cause of action for a breach of fiduciary duty in New Jersey, a
plaintiff must show that the defendant had a duty to the plaintiff, that the duty was breached, that
injury to plaintiff occurred as a result of the breach, and that the defendant caused that injury.”
Goodman v. Goldman, Sachs & Co., No. 10–1247, 2010 WL 5186180, at *10 (D.N.J. Dec. 14,
2010) (citing St. Matthew’s Baptist Church v. Wachovia Bank Nat. Ass’n, No. A. 04–4540, 2005
WL 1199045, at *9 (D.N.J. May 18, 2005); see also In re ORFA Sec. Litig., 654 F. Supp. 1449,
1457 (D.N.J. 1987) (explaining that to prove a breach of fiduciary duty, plaintiff must show “a
duty, a breach, an injury, and causation”). The duties that arise in the fiduciary relationship
“include the duty of loyalty and the duty to exercise reasonable skill and care.” Inventory Recovery
Corp. v. Gabriel, No. 11-1604, 2012 WL 2990693, at *4 (D.N.J. July 20, 2012).
a. Duty of Care
The Court must first address whether Defendants owed a fiduciary duty to Plaintiff. With
respect to the first element, “[t]he essence of a fiduciary relationship is that one party places trust
and confidence in another who is in a dominant or superior position. A fiduciary relationship
arises between two persons when one person is under a duty to act for or give advice for the benefit
of another on matters within the scope of their relationship.” F.G. v. MacDonell, 150 N.J. 550,
563-64 (1997) (citing Restatement (Second) of Torts § 874 cmt. a (1979)); Trianco, LLC v. IBM,
271 F. App’x 198, 203 (3d Cir. 2008) (finding that a duty arises out of a “special relationship of
trust and confidence” between the parties). Thus, in order to identify the nature and extent of any
fiduciary duty between the parties to this case, the Court must first analyze and determine the true
nature of the relationship between the parties.
Defendants contend that the business relationship between them and Plaintiff was that of a
joint venture. A joint venture is “[a] special combination of two or more persons where in some
specific venture, a profit is jointly sought without any actual partnership or corporate designation.”
Burnham v. WMC Mortg. Corp., No. 07-6101, 2010 WL 2560657, at *7 (D.N.J. June 21, 2010)
(quoting Wittner v. Metzger, 178 A.2d 671, 675 (N.J. Super. Ct. App. Div. 1962), cert. denied, 37
N.J. 228 (1962)). “A joint venture is predicated on the same legal event as an employment or
partnership contract--an agreement between the parties.” Material Techs. v. Carpenter Tech.
Corp., No. 01-2965, 2004 U.S. Dist. LEXIS 28892, at *22-23 (D.N.J. Dec. 14, 2004) (citing
Sullivan v. Jefferson, Jefferson & Vaida, 400 A.2d 836, 839 (N.J. Super. Ct. App. Div. 1979));
Wittner, 178 A.2d. at 674. The joint venture relationship, however, may be less formal than a
partnership. Hellenic Lines, Ltd. v. Commodities Bagging & Shipping, Process Supply Co., 611
F. Supp. 665, 679 (D.N.J. 1985). It may be implied wholly or in part from the acts and conduct of
the parties, and where there is an explicit agreement, it “need contain no particular form of
expression, nor is formality of execution necessary.” Id.; Wittner, 178 A.2d. at 675. “It is ‘an
undertaking usually in a single instance to engage in a transaction of profit where the parties agree
to share profits and losses.’” Burnham, 2010 WL 2560657, at *7 (quoting Ginsberg v. Bistricer,
No. A-5751-03T5, 2007 N.J. Super. Unpub. LEXIS 474, at *32-33 (N.J. Super. Ct. App. Div. Apr.
4, 2007) (internal citation omitted)). “For a joint venture to have been formed, the parties must
have agreed upon the essential terms.” Id. A joint venture agreement will, however, contain some
or all of the following elements:
(A) A contribution by the parties of money, property, effort,
knowledge, skill or other asset to a common undertaking;
(B) A joint property interest in the subject matter of the venture;
(C) A right of mutual control or management of the enterprise;
(D) Expectation of profit, or the presence of ‘adventure,’ as it is
(E) A right to participate in the profits;
(F) Most usually, limitation of the objective to a single undertaking
or ad hoc enterprise.”
Id. (quoting Wittner, 178 A.2d. at 675).
In this case, it is clear from the facts that many of the essential terms of the subject venture
were agreed upon between the parties. In 2004, Karpman and Timokhine, via their respective
companies Interlink and ATFC, entered into a business relationship. SOF §3, No. 11; Timokhine
Test; Karpman Test. In 2005, Interlink and ATFC began a joint project to export broiler hatching
eggs – eggs used for meat production – to Russia and the CIS countries. SOF §3, No. 11. At the
initiation of the egg shipping business, although they never entered into a formal written contract,
the parties orally agreed to split the profits of the business equally at 50% to each party. Id.;
Karpman Test., Vol. III, 449:22-451:2, 509:13-15, 515:25-516:1; Timokhine Test., Vol. I, 172:68, 173:14-19. The parties also were responsible for their own costs. The parties agreed that
Interlink would be the face of the egg shipping business. SOF §3, Nos. 12, 13; Timokhine Test.
As the face of the operation, Interlink was the named party in all contracts from purchasing from
U.S.-based producers through transportation to Russian and CIS purchasers. SOF §3, Nos. 12, 13;
Karpman Test.; Timokhine Test.
The parties’ actions and conduct demonstrate their intention to form a joint venture. Both
parties contributed their skills, efforts, and knowledge to the venture. Timokhine was involved to
varying degrees in negotiations with U.S. suppliers, was responsible for preparing the drafts of the
purchase and exclusivity agreements, the veterinarian clearance processing, the keeping of
Interlink’s business documents, and management of Interlink’s bookkeeping and finances.
Timokhine Test.; Karpman Test. Timokhine also handled transportation reservations and contracts
with all transportation companies. Timokhine Test., Vol. I, 40:1-13. The parties agreed that
Timokhine would have the title of Chief Financial Officer in order to more easily represent the
Interlink-ATFC efforts, but that he would receive no additional compensation for the title. SOF
§3, No. 11; Timokhine Test.; Karpman Test. Karpman testified that he personally conducted all
negotiations related to transportation of the eggs from the United States to overseas. Karpman
Test. At times, however, it appears that both Timokhine and Karpman were jointly involved in
negotiations. Timokhine Test., Vol. I, 40:22-24, 173:12-13; Karpman Test., Vol. III, 390:1-10,
465:17 to 466:10. Timokhine also testified that all issues were discussed jointly and approved
jointly. Timokhine Test., Vol. I, 41:17-22. Timokhine testified that the parties realized that “each
party brings to the project their own experience, their own knowledge their own capabilities, their
own knowledge and their own capabilities and each party will do the best of – the best that each
party could do.” Timokhine Test., Vol. I, 42:11-15. Given all of this evidence, the Court finds
that Interlink and ATFC were indeed engaged in a joint venture as that term is defined in the law.
“Joint venturers and partners, respectively, do as a general matter owe fiduciary duties to
one another.” UBI Telecom Inc. v. KDDI Am., Inc., No. 13-1643, 2014 WL 2965705, at *10
(D.N.J. June 30, 2014) (citing Silverstein v. Last, 383 A.2d 718, 721 (N.J. Super. Ct. App. Div.
New Jersey cases decided since the 1919 enactment of the Uniform Partnership Law
almost invariably hold that joint ventures are subject to the same legal rules as partnerships. See,
e.g., Walter v. Holiday Inns, Inc., 784 F. Supp. 1159, 1167 n.10 (D.N.J.1992), aff’d, 985 F.2d 1232
(3d Cir. 1993); Hellenic Lines, 611 F. Supp. at 679. Under New Jersey’s Revised Uniform
Partnership Act, a partner’s fiduciary duty is “limited to refraining from engaging in grossly
negligent or reckless conduct, intentional misconduct, or a knowing violation of law.” N.J.S.A.
42:1A-24. “Gross negligence is defined as ‘conduct that comes somewhere between ‘simple’
negligence and intentional infliction of harm, or, ‘willful misconduct.’”
Zhang v. Ridgewood
YMCA, No. A-3485-09T2, 2011 WL 589586, at *4 (N.J. Super. Ct. App. Div. Feb. 22, 2011)
(citations omitted). “Gross negligence requires ‘indifference to consequences,’ and may be
equated with willful or wanton conduct.” Id. (citations omitted).
Plaintiff claims that Defendants breached their fiduciary duty in three ways: (1) Defendants
drafted exclusivity agreements of unlimited duration that were found to be unenforceable; (2)
Timokhine emailed Morris Hatchery that their exclusivity agreement was to expire at the end of
2010 when the parties were operating under an exclusivity period of unlimited duration; and (3)
Defendants failed to secure a completely exclusive relationship with Morris Hatchery and allowed
Morris to set up direct sales with Agro-Oven producers in Ukraine. See Dkt. No. 113, Pl.’s Tr. Br.
The Court finds that there has been no evidence or testimony to support a claim that
Defendants challenged actions constitute gross negligence. Timokhine testified that his role in the
joint venture was to prepare drafts of the exclusivity agreements, which were then reviewed jointly
by Karpman and himself. Timokhine Test., Vol. I, 44:24-45:2. Timokhine even testified that it
was Karpman’s idea to include the unlimited duration term for these agreements. Timokhine Test.,
Vol. I, 49:2-4. Moreover, Timokhine never represented to Karpman that he had any legal training
or that he would secure legal advice. Thus, it is unreasonable for Karpman to claim that he relied
on Defendants to advise him concerning the legalities of the contractual terms. As to the emails
to Morris Hatchery, Timokhine testified that the email he sent to Morris Hatchery was a mistake,
Timokhine Test., Vol. I, 69:1-6, but it certainly does not appear to the Court to approach justifying
any finding of gross negligence. Finally, the Court finds there was no breach of duty related to the
allegation that Defendants failed to secure a completely exclusive relationship with Morris
Hatchery for producers in Ukraine. Plaintiff simply did not proffer any evidence that Defendants
were grossly negligent in this regard. In fact, Karpman only testified that Timokhine told him that
Morris lied to him about the amendment. Karpman Test., Vol. III, 390:6-391-8. Accordingly, the
Court finds that Defendants did not act with indifference to the consequences in his business
dealings for the joint venture, nor did they act in a grossly negligent fashion. Defendants merely
made decisions on how to best fulfill their duties in the egg shipping business. The fact that these
decisions were not successful to the extent that Plaintiff desired does not, in and of itself, make
Defendants’ efforts a breach of fiduciary duty. And, again, these decisions certainly do not rise to
the level of gross negligence. Accordingly, the Court finds that Plaintiff has failed to provide
sufficient evidence that Defendants’ actions constitute a breach of fiduciary duty.9
Even if the Court were to conclude that the relationship between Plaintiff and Defendants was
not a joint venture, and was instead that of principal and agents, Defendants could not be held
liable for breach of fiduciary duty. “[A]n agent has a duty to the principal to act with the care,
competence, and diligence normally exercised by agents in similar circumstances.” Restatement
(Third) of Agency § 8.08 (2006); see also Big M, Inc. v. Dryden Advisory Grp., No. 08-3567, 2009
WL 1905106, at *23 (D.N.J. June 30, 2009).
The duty of reasonable care is not, however, a guarantee for success in and of itself. See Morris
v. Muller, 113 N.J.L. 46, 49 (1934). Where an error occurs from a reasonable, but ultimately bad,
judgment call, there is no breach of duty. See id.; Brown v. United Cerebal Palsy/Atl. & Cape
May, Inc., 650 A.2d 848, 851-53 (Law Div. 1994). Discretionary judgment calls only reach the
level of breach of duty where there is no rational basis for the action. See Brown, 650 A.2d at 852.
(“The concept of negligence, however, when dealing with the propriety of discretionary decisions,
involves an area in which mistakes are not negligent unless no reasonable person would have made
them (i.e., they were unconscionable).”).
As noted repeatedly in these findings and conclusions, Karpman knew Timokhine and was
generally familiar with his background, and Karpman knew that Timokhine never held himself out
to be a lawyer or to have legal training. See Karpman Test., Vol. III, 444:16-23; see also
Timokhine Test., Vol. I, 176:3-10. In fact, it is clear to the Court based upon the sum total of the
testimony and other evidence before it, that Interlink engaged Defendants for their business
acumen and not as legal counselors.
Under this rubric, and assuming arguendo a principal agent relationship, the complained of events
fall well within the category of discretionary decisions and errors of judgment; they were rational
decisions that did not work out as planned, not negligence sufficient to constitute a breach of
fiduciary duty. Acting with reasonable skill and care does not require an individual to expend any
and all costs and efforts. If it did, the Court would be required to find a breach of fiduciary duty
whenever a potential business risk befell the venture and Defendants could have hired or consulted
someone or otherwise done something extra to prevent the result. See Restatement (Third) § 8.08;
see also Industrial Maritime Carriers v. Thomas Miller Inc., No. 06–5625, 2009 WL 5216971, at
*8 (D.N.J. Dec. 29, 2009). Here, Defendants made discretionary decisions on how to best fulfill
his duties in the egg shipping business, and to the extent he made any mistakes, they were not
unconscionable mistakes. The fact that Defendants were unsuccessful to the extent desired by
Plaintiff and Karpman does not, by itself, make Defendants’ efforts a breach of fiduciary duty.
Plaintiff has not provided evidence or facts to demonstrate Defendants’ activities were such that
no reasonable person of similar skill and function would make them.
Moreover, Karpman appeared to accept Timokhine’s performance. Karpman’s testimony
indicates that he believed he had significant latitude to change Plaintiff’s working relationship with
Defendants. Indeed, Karpman testified that in April 2011, he was dissatisfied with the
performance of Timokhine to the point that he sought to reduce Defendants’ compensation under
the profit-sharing agreement. Karpman further testified that his reduction of Defendants’
compensation was only after the CWT arbitration panel rejected the unlimited duration exclusivity
provision in 2009. The Court notes that Karpman’s offer to reduce Defendants’ payment came
after the initiation of the Florida lawsuit, and well after Timokhine’s 2010 email to Morris. With
these events having already taken place, Karpman was still apparently satisfied with Timokhine’s
performance enough to keep his services at a reduced rate. It was only Timokhine’s dissatisfaction
with the pay scale that caused the ultimate death of their business relationship. The Court would
be hesitant to impose a breach of fiduciary duty upon Defendants for performance with which
Plaintiff and Karpman appeared at least tacitly satisfied. See Fried v. Aftec, Inc., 587 A.2d 290,
297 (N.J. Super. Ct. App. Div. 1991) (“An employer cannot give an employee negative fitness
reports, retain the employee, and later sue him for failure to perform the agreement or for overall
negligence or carelessness, allegedly causing the company financial losses. . . . The employer’s
remedy is to fire the employee for ineptness or lack of diligence.”).
c. Duty of Loyalty
In the Court’s July 18, 2014 Opinion on Summary Judgment, the Court denied Plaintiff’s
claims for breach of Defendants’ fiduciary duty of loyalty as an improper attempt to amend the
Complaint through brief on a motion. See Dkt. No. 100, July 18, 2014 Op., at 17. As the Court
has already limited the claims to the breach of the duty of care, the Court need not reach Plaintiff’s
arguments related to Defendants’ alleged breach of loyalty.10
F. Breach of Fiduciary Duty by Alexander Karpman (Third Party Complaint, Count I)
Defendants also assert Karpman breached his fiduciary duties through his activities and
ultimate failure to pay some of the monies owed to Timokhine as consideration for the NCA or
profits earned in the egg shipping and coal ventures. See FPO, at ¶¶ 69-94; Dkt. No. 32, Third
Party Compl., Count I, ¶¶ 6-42. As the Court has previously discussed, the NCA is a valid contract,
and the $780,504.75 constitutes both consideration for the NCA and payment of any monies owed
The Court notes, however, that Plaintiff’s claim for breach of loyalty would fail in any regard.
Notably, Plaintiff has failed to show any injury stemming from Defendants’ alleged breach of
loyalty. To recover money damages for an employee’s breach of the duty of loyalty, the employer
must establish that the employee’s breach proximately caused the requested damages. See Cameco
Inc. v. Gedicke, 157 N.J. 504, 518 (1999). Plaintiff has not alleged any harm from Defendants’
alleged disloyalty. Plaintiff’s claim for breach of loyalty focuses on Timokhine’s contract with
Keith Smith. Timokhine emailed Keith Smith to inform them he was leaving and to offer his help
in the future. At this point, Keith Smith did not have a contract with Interlink. After Timokhine
left the egg-shipping business, Timokhine entered into a relationship with Keith Smith, and a
contract was signed between White Bird and Keith Smith. That contract never came to fruition,
however, and Timokhine withdrew from that relationship. Moreover, Keith Smith and Interlink
were simultaneously in discussions to continue their previous egg-shipping business. Indeed, the
parties entered into an exclusive relationship in September 2012, which Eddy Slick testified was
still in place. Slick Test. Additionally, Plaintiff neither provided proof on the record, nor in its
expert report prepared by Udinsky, of any damage calculations based upon Defendants’ breach of
his duty of loyalty. The report and testimony relate solely to any breach of duty of care by
to Defendants. Therefore, Defendants cannot establish the required element of injury and this
For all of the foregoing reasons, the Court concludes that the NCA, as modified herein, is
a valid and enforceable contract. The Court finds in favor of the Defendants ATFC and Timokhine
on Plaintiff’s claims for breach of contract (Plaintiff’s Complaint, Count I) and breach of fiduciary
duties (Plaintiff’s Complaint, Count III). The Court finds in favor of the Plaintiff Interlink on
Defendants’ claims for breach of contract (Amended Counterclaim, Counts I, II, and VII), unjust
enrichment (Amended Counterclaim, Count III), promissory estoppel (Amended Counterclaim,
Counts IV and VIII), declaratory judgment (Amended Counterclaim, Count V), and tortious
interference with contractual relations (Amended Counterclaim, Count VI). The Court finds in
favor of Third Party Defendant Karpman on Defendants’ claims for breach of fiduciary duty (Third
Party Complaint, Count I), fraudulent misrepresentation (Third Party Complaint, Count II), and
tortious interference with contractual relations (Third Party Complaint, Count III). An appropriate
Order accompanies these Findings of Fact and Conclusions of Law.
Dated: February 20, 2015
s/ James B. Clark, III
JAMES B. CLARK, III
United States Magistrate Judge
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