Graphnet, Inc. v. Retarus, Inc.

• Decision Date: 11 February 2022
• Docket Number: 085529,A-71 September Term 2020
• Citation: 269 A.3d 413,250 N.J. 24
• Parties: GRAPHNET, INC., Plaintiff-Appellant, v. RETARUS, INC., Defendant-Respondent.
• Court: New Jersey Supreme Court

250 N.J. 24

269 A.3d 413

GRAPHNET, INC., Plaintiff-Appellant,

v.RETARUS, INC., Defendant-Respondent.

A-71 September Term 2020

085529

Supreme Court of New Jersey.

Argued November 30, 2021

Decided February 11, 2022

Joseph Schramm, III, argued the cause for appellant (FisherBroyles, attorneys; Joseph Schramm, III, Princeton, on the briefs).

Karl Geercken argued the cause for respondent (Alston & Bird, attorneys; Karl Geercken and Steven L. Penaro, on the briefs).

JUSTICE FERNANDEZ-VINA delivered the opinion of the Court.

In this appeal, the Court considers whether a new trial on all damages is required when the jury is improperly instructed on nominal damages and a plaintiff opposes remittitur.

Plaintiff Graphnet, Inc. and defendant Retarus, Inc. are competitors in the cloud-based messaging industry. In 2014, Retarus published a brochure containing allegedly defamatory statements about Graphnet. Graphnet filed a civil action against Retarus in 2016 alleging, among other causes of action, defamation.

Following trial, the court instructed the jury on damages for defamation following Model Civil Jury Charge 8.46D, which instructs a jury that it may award nominal damages "to compensate" a plaintiff for injury to reputation caused by a defendant's defamation. The jury returned a unanimous verdict finding that Retarus defamed Graphnet. By a 5-1 vote, the jury found that Graphnet failed to show that it suffered actual damages. However, the jury awarded Graphnet $800,000 in nominal damages.

Without obtaining Graphnet's consent, the trial court granted Retarus's motion for remittitur and reduced the nominal damages award to $500, holding that $800,000 in nominal damages was grossly disproportionate to the purpose of nominal damages.

The Appellate Division agreed that the initial nominal damages award could not stand, but it vacated the trial court's order and remanded for a new trial on nominal damages because, in its view, granting a defendant's motion for remittitur without a plaintiff's consent was improper.

For the reasons that follow, we affirm the Appellate Division's finding that remittitur was improper without Graphnet's consent. However, we conclude that this matter requires a new trial on all damages in which the jury is properly instructed on actual and nominal damages. We also refer Model Civil Jury Charge 8.46D to the Committee on Model Civil Jury Charges to be amended.

I.

Graphnet and Retarus are considered industry competitors -- they each provide, among other things, cloud-based facsimile services. In February 2011, Retarus, which is headquartered in Germany, announced an expansion into the North American market.

In 2014, Retarus prepared the brochure that is the subject of Graphnet's defamation claim here. The brochure described Retarus's services, listed some of its then-clients, and contained a section titled "Competition Analysis" that described the purported advantages of Retarus's services over named competitors, including Graphnet. The brochure listed several "[d]isadvantages" of Retarus's competitors, including security issues, lack of customer support, and "difficulty with uptime (especially Graphnet)."

In May 2016, members of Graphnet's sales team attended a technology exposition event called Techspo in New York City. Retarus distributed the brochure at the event, and Graphnet's sales team brought a brochure back to a member of Graphnet's Executive Team, Guy Conte.

A.

On August 16, 2016, Graphnet filed a complaint against Retarus asserting defamation/slander; disparagement of goods/trade libel; false light; tortious interference with prospective economic advantage; tortious interference with a contract; and unjust enrichment. Through an amendment to the complaint, Graphnet added several causes of action, including violations of the Telecommunications Act and Federal Communication Commission regulations.

Throughout discovery, Graphnet failed to produce requested documents and took no depositions. On September 14, 2018, Retarus moved for summary judgment. Based on Graphnet's failure to present supporting evidence, the trial court dismissed all claims except for the defamation and slander claims.

A six-day jury trial began on January 29, 2019. At trial, Graphnet introduced evidence that it had lost revenue from several clients after Retarus published the brochure, most notably J.P. Morgan Chase (JPMC). JPMC was a longstanding client of Graphnet's for almost two decades and, at times, generated $1.5 million in annual revenue for Graphnet. Retarus began doing business with JPMC in 2014; that year, JPMC generated more than $1 million in revenue for Graphnet. However, by 2015, Graphnet's revenue from JPMC began to decline, generating approximately $800,000 in 2015, $300,000 in 2016, and $100,000 in 2017. During this time, Retarus's revenue from JPMC began to increase. Retarus gained revenue from JPMC of approximately $1.5 million in 2016, $1.7 million in 2017, and $1.8 million in 2018. By 2019, JMPC had ceased doing business with Graphnet.

Retarus's Senior Vice President of Sales, Tim Valentine, testified at trial that the brochure was not a promotional brochure intended to be given to potential clients, but rather an internal tool used to train Retarus's telemarketers. He testified that he was unaware of Retarus distributing the brochure to any potential clients or anywhere outside of the company. Graphnet did not provide testimony at trial from anyone who received the brochure at the Techspo exhibition.

The jury heard testimony derived from the affidavit and deposition of Jeffrey Chaney, who worked at JPMC from 2001 to 2015 and had dealings with both Graphnet and Retarus during that time. Chaney testified that he had seen the brochure years earlier and that it looked "like a sales pitch to [JPMC] of what Retarus can do for [JPMC]." He also testified that Retarus had neither disparaged Graphnet nor provided materials to JPMC that cast Graphnet in a negative light. Chaney stated that JPMC did not rely on the brochure in choosing Retarus as a new vendor.

Conte testified that JPMC began reducing its business with Graphnet as early as 2013 and conceded that Graphnet received complaints from many customers, including JPMC, regarding issues in Graphnet's services that resulted from damage sustained from Hurricane Sandy in 2012.

B.

The trial court and the parties agreed that the court would charge the jury pursuant to Model Civil Jury Charge 8.46, entitled "Defamation Damages (Private or Public)," which instructs a jury on the elements of defamation. Section A provides general instructions on damages, distinguishing between compensatory and punitive damages. Sections B through D, in turn, focus on compensatory damages: Section B applies to most claims for compensatory or actual damages; Section C is devoted to compensatory damages for emotional suffering; and, of particular relevance here, Section D is devoted to "Nominal Damages for Slander Per Se or Libel."

The trial court first provided the following instruction to the jury on general damages:

For the injury to reputation caused by defendant's alleged defamatory statement, plaintiff seeks to recover compensatory damages. Compensatory damages are sought by the plaintiff for the recovery of money value of their loss. If the plaintiff has established the essential elements of their claim as explained in my instructions, they're entitled to compensatory damages for all detrimental effects of the defamatory statement relating to the plaintiff's reputation which were reasonably to be foreseen and which are the direct and natural result of the defamatory statement. Damages awarded for such purposes are compensatory.

That instruction followed Section A nearly verbatim other than the removal of language about punitive damages, which were not sought by Graphnet.

The trial court then provided the jury the following instruction on compensatory damages:

[C]ompensatory damages are referred to as special damages. These damages are never presumed. They must be specified by the plaintiff and proved by the evidence. Plaintiff must show you what the special loss was and by what sequence of connected events it was produced by the defamation.

Plaintiff can recover these damages only if you determine that the defendant's conduct was a substantial factor in causing plaintiff's actual losses, financial or economic. Evidence of embarrassment, mental suffering or physical sickness will not -- and this really doesn't apply to it -- a company mental suffering or sickness, but embarrassment will not, without more, entitle plaintiff to these damages.

Here, the plaintiff claims that they suffered specific damage as a result of the publication of the defamatory statement. I will now outline the specific damages claimed by the plaintiff. And these damages are as follows: it is the loss of business opportunity and loss of business property.

That instruction likewise followed Section B very closely, except for the clarification about mental suffering or physical sickness.

Lastly, the trial court provided the following instruction to the jury on nominal damages:

In the event that you find the plaintiff is not entitled to actual damages plaintiff claims were caused by defendant's wrongful act, plaintiff seeks for recovery for nominal damages which the law presumes to follow naturally and necessarily from the publication of the [libel] and are recoverable by the plaintiff without proof of causation and without proof of actual injury. The law recognizes the damage to reputation caused by defamation may not always lend itself to proofs of -- by objective evidence.

An opportunity may be closed to the business without their knowledge. Damage to the character or reputation could occur without the corporation or the business knowing of the [libel] or slander. A person's business or, in this case, may be limited by the operations of forces which the person cannot identify, but which, nevertheless, were set in motion by the

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