2005-067, MORTGAGE SPECIALISTS, INC. v. JOSEPH C. DAVEY, IV & a.

order of the Superior Court (Morrill, J.) denying its motion to set aside the jury DALIANIS, J. The plaintiff, Mortgage Specialists, Inc., appeals: (1) an

and Robert R. Lucic on the brief, and Mr. Cole orally), for the defendants.

Sheehan Phinney Bass + Green, P.A., of Manchester (Christopher Cole

Gordon, P.A., of Concord (Arpiar G. Saunders, Jr. on the brief), for the plaintiff.

and Danielle L. Pacik on the brief, and Mr. Walker orally), and Shaheen &

Devine, Millimet & Branch, P.A., of Manchester (Alexander J. Walker, Jr.

to press. Errors may be reported by E-mail at the following address:

page is: http://www.courts.state.nh.us/supreme. MORTGAGE SPECIALISTS, INC.

editorial errors in order that corrections may be made before the opinion goes No. 2005-067 Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Rockingham Readers are requested to notify the Reporter, Supreme Court of New ___________________________

a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as trial.

p. 2 former customers, with some limited exceptions.

variety of claims and seeking injunctive relief and damages. imposed sanctions upon the defendants for their conduct prior to and during

from contacting or communicating with any of Mortgage Specialists’ current or disclosing Mortgage Specialists’ customer information and prohibiting them preliminary injunction prohibiting the defendants from misappropriating or 2 previously worked at Mortgage Specialists. employers and with their own businesses, for customers with whom they had

Mortgage Specialists. Mortgage Specialists brought this suit in 2003, alleging a jury returned a verdict in favor of the defendants. The trial court subsequently

would benefit the customer. current interest rate, from which a competitor could learn whether refinancing of his work. The most important piece of information was the customer’s claim that the defendants misappropriated its trade secrets. It also issued a

Specialists, Davey and Carbone have both closed loans, with their subsequent

they had taken copies of customer information with them when they left A jury trial was held in September 2004 on the trade secrets claim. The

left, each took with him copies of customer information retained in the course The trial court dismissed all of Mortgage Specialists’ claims except for its

of defendant Signature Mortgage Group, LLC. Since leaving Mortgage Partners, is the owner of defendant Team Mortgage, LLC. Carbone is the owner Davey, who worked at Carteret Mortgage for a short time after leaving Mortgage November 2002 in connection with that litigation, and both acknowledged that misappropriation of trade secrets. Davey and Carbone were both deposed in its former customers, it initiated suit against Mortgage Partners for When Mortgage Specialists learned that Mortgage Partners had contacted

Mortgage Specialists to work for a competitor, Mortgage Partners. When they worked as loan originators for Mortgage Specialists. In July 2002, both left offices in Massachusetts and New Hampshire. Defendants Davey and Carbone

Davey and Carbone subsequently started their own mortgage businesses.

Mortgage Specialists is a mortgage brokerage and lending company with

I. Background

them. We affirm in part, vacate in part, and remand. post-trial order of the Superior Court (Morrill, J.) assessing sanctions against Steven Michael Carbone, and Signature Mortgage Group, LLC, cross-appeal a other claims. The defendants, Joseph C. Davey, IV, Team Mortgage, LLC, (1995); and (2) a pretrial order of the Superior Court (Coffey, J.) dismissing its verdict on its claim for misappropriation of trade secrets, see RSA ch. 350-B before leaving the company. p. 3 did not ask either Davey or Carbone to return or destroy customer information

copying or maintaining copies of customer information. Mortgage Specialists

information belonged to Mortgage Specialists or that they were prohibited from

agreement, neither Davey nor Carbone had been told that customer Mortgage Specialists shortly thereafter. Prior to being presented with the Carbone signed the agreement, and each terminated his relationship with

Specialists asked all of its loan originators to sign it. Neither Davey nor

seen or heard about the agreement before July 2002, when Mortgage actually signed it between 1999 and 2001. Davey and Carbone deny having and non-disclosure agreement by 1999, only some of its loan originators

employee handbook. Although Mortgage Specialists created a confidentiality during a given shift. The telemarketers were not permitted to photocopy the

written policy regarding confidentiality or document destruction and no Supervisors gave telemarketers only a limited number of pages from these lists Davey and Carbone worked for Mortgage Specialists, the company had no business after leaving Mortgage Specialists, throughout the time during which

customer’s loan amount, loan type, and interest rate, was restricted. the lists of potential repeat customers, which contained information about each originators and the tendency of loan originators to stay in the mortgage were not marked as trade secrets or as confidential. Nevertheless, access to

constituted trade secrets. Despite a relatively high turnover among its loan Mortgage Specialists’ telemarketers. The lists of potential repeat customers

subject to reasonable efforts to maintain its secrecy under the circumstances.”

Mortgage Specialists’ documents or customer information was confidential or customers and lists of potential repeat customers were distributed regularly to asked to sign a non-disclosure or confidentiality agreement, nor told that and independent contractors in various formats. Lists of potential new Both were hired as independent contractors. Upon hiring, they were neither collected and stored customer information and disseminated it to its employees While Davey and Carbone were working at Mortgage Specialists, it

not a trade secret because “Mortgage Specialists’ customer information was not concluded that the alleged confidential information underlying its claims was denied Mortgage Specialists’ motion, finding that a reasonable jury could have

Carbone began working as loan originators for Mortgage Specialists in 1999.

did in this case in the face of such overwhelming evidence.” The trial court

A reasonable jury could have found the following facts: Davey and

See RSA 350-B:1, IV(b). We agree.

presented at trial” and “[n]o reasonable jury could have reached the verdict it asserted that the jury’s verdict was “against the great weight of the evidence Mortgage Specialists filed a motion to set aside the jury’s verdict. It

II. The Trade Secrets Claim department. p. 4 destroy the pipeline reports or to return them to a particular individual or

trade secrets or as confidential. Loan originators were not instructed to

information would not be disclosed to third parties.

the type of loan, and the interest rate. The pipeline reports were not marked as information about each customer’s loan, including the customer’s last name, loan originators. These lists, referred to as “pipeline reports,” contained basic

accompanied by a privacy policy disclosure, indicating that the customer’s

the lead sheet and filled out the application by hand. The loan application was with a customer, Davey and Carbone both typically took notes on the back of credit history, and the interest rate on the existing mortgage. When meeting keep in touch with the customer throughout the loan application process. testified that some loan originators retained this information so that they could retained copies of the lead sheet or the first page of the application. Carbone

While loans were in process, lists of all open loan applications were regularly Specialists’ computerized database, which could be accessed by the processors. Mortgage Specialists, all application information was entered into Mortgage

security number, detailed information regarding income, bank accounts, and

returned to Mortgage Specialists for processing. Davey and Carbone often

lead sheets or to return them to a particular individual or department. confidential. Neither Davey nor Carbone was ever instructed to destroy the interest rate. The lead sheets were not marked as trade secrets or as After the completed application was given to the loan processors at

the applicant to disclose a great deal of personal information, including a social

After the loan application was completed, the application package was

number of the individual, and sometimes included the individual’s current

Known as a Form 1003, the application consisted of several pages and required of the information needed to complete a standard residential loan application. they left. As loan originators met with customers, the loan originators gathered all Mortgage Specialists has not alleged that they took copies of these lists when

Davey and Carbone. The lead sheets often included the name and phone telemarketers created “lead sheets” to be passed on to loan originators such as Mortgage Specialists, including both new and repeat customers, the As telemarketers contacted individuals interested in doing business with

end of the shift. Davey and Carbone did not have access to these lists, and pages, and were required to return all pages of the list to the supervisor at the from Mortgage Partners’ possession.

p. 5 customer information, it took no steps to retrieve the customer information

Specialists’ apparent knowledge that Mortgage Partners had access to its Specialists, and ultimately met with its president. Despite Mortgage August 2002. The customer spoke to several employees at Mortgage

the circumstances.

information and complained about the situation to Mortgage Specialists in

maintain the secrecy of its customer information were not reasonable under verdict, claiming that no reasonable juror could have found that its efforts to was angered by the fact that Mortgage Partners had access to his personal It argues that the trial court erred in denying its motion to set aside the jury Partners. One of the former customers, when contacted by Mortgage Partners, of his former customers to let them know that he was now working at Mortgage

meaning of the New Hampshire Uniform Trade Secrets Act, RSA chapter 350-B.

taken with him from Mortgage Specialists and she was instructed to contact all

weight of the evidence or if it is the result of mistake, partiality, or corruption.

one no reasonable jury could return. evidence that the defendants misappropriated its trade secrets within the Id. As the plaintiff argues only that the “Conclusively against the weight of the evidence” means that the verdict was it. and loan originators were not instructed to return it or to refrain from copying Mortgage Partners a bag filled with copies of loan applications that he had PMC Corp. v. Houston Wire & Cable Co., 147 N.H. 685, 692 (2002).

A jury’s verdict may only be set aside if it is conclusively against the

On appeal, Mortgage Specialists contends that there was overwhelming

database. The printout was not marked as a trade secret or as confidential, loan originators at Mortgage Partners. Carbone gave a telemarketer at

retrieved old files from storage when they wanted to review or copy information.

the application information from the individuals who had access to the After leaving Mortgage Specialists, Davey and Carbone both worked as application after the loan was closed, he could obtain a computer printout of the owners and the office manager. If a loan originator needed access to an and was not restricted. Davey and Carbone sometimes entered the attic and Specialists’ Plaistow office. Access to the attic was through an unlocked door copies of customers’ closed loan files were stored in the attic of Mortgage While Davey and Carbone were working at Mortgage Specialists, the hard

was transferred into a password-protected database, accessible only by one of After the loan was closed, the electronically-stored customer information information, the jury could have found that its efforts were inconsistent. p. 6 Mortgage Specialists took some steps to maintain the secrecy of its customer

could enter the attic storage area to access a hard copy of the closed file. While

of that information be printed and given to him, and that any loan originator testimony at trial indicating that any loan originator could request that a copy copies of old loan applications was restricted by a password, there was

from misappropriating customer information. While access to the electronic

identity theft, rather than an intent to prevent Mortgage Specialists’ employees

customers from the sale of their personal information or from the risk of efforts could have been found by the jury only to demonstrate a need to protect nonaffiliated third parties, and it placed shredders around its office, these

that it would not disclose the customer’s nonpublic personal information to

provided all of its customers with a privacy policy acknowledgement indicating independent contractors in other forms. Although Mortgage Specialists customer information that was stored and disseminated to its employees and

whether Mortgage Specialists took any steps at all to maintain the secrecy of

did not have access and did not copy, there was conflicting testimony as to circumstances, and, accordingly, was not a trade secret. secrecy of its lists of potential repeat customers, lists to which the defendants there was evidence that Mortgage Specialists took specific steps to maintain the

was not subject to reasonable efforts to maintain its secrecy under the the evidence presented at trial that Mortgage Specialists’ customer information proper treatment of the information as confidential and/or proprietary.” While unsustainable exercise of discretion, as a reasonable jury could conclude from The trial court’s decision not to set aside the jury verdict was not an

is confidential . . . and should not be disclosed.” We disagree. originators on notice that [the] type of information contained in the Form 1003s

originators were not consistently and uniformly given instructions as to the

“reasonable under the circumstances because they clearly put the loan

documents “were kept in an attic for many years,” and that “the loan interest rates, “were never marked confidential or trade secret,” that those discretion. documents containing customer information, including customers’ current motion to set aside the jury verdict unless it is an unsustainable exercise of As the trial court indicated in its order, the jury heard testimony that the

the measures it took to maintain the secrecy of its customer information were to maintain its secrecy.” RSA 350-B:1, IV(b). Mortgage Specialists argues that things, be “the subject of efforts that are reasonable under the circumstances For information to be a trade secret, the information must, among other

See Babb v. Clark, 150 N.H. 98, 100 (2003).

issue. We will not overturn the trial court’s denial of Mortgage Specialists’ jury verdict was against the weight of the evidence, we limit our review to that p. 7 Specialists’ employees.

behalf of Mortgage Partners. The defendants have also solicited Mortgage

trade secret within the meaning of the NHUTSA, the trial court ruled that RSA

Specialists to contact Mortgage Specialists’ customers and solicit business on Davey and Carbone have used confidential information taken from Mortgage proper New Hampshire licensing.” Since leaving Mortgage Specialists, both

continued to dispute whether the confidential information at issue was in fact a common law and CPA claims would be premature, given that the parties NHUTSA. In response to Mortgage Specialists’ argument that dismissal of the

Specialists’ customers that Mortgage Specialists was operating without the

information,” the trial court concluded that the claims were preempted by the

with Mortgage Partners.” Carbone admitted that he “informed Mortgage license and was in trouble in New Hampshire, and luring them to do business confidential information with them, reporting that Mortgage Specialists had no

misappropriation or misuse of trade secrets . . . and/or confidential common law and CPA claims were not “supported by facts other than the Specialists’] trade secrets are preempted” by the NHUTSA. Finding that the

CPA, and breach of fiduciary duty. conversion, tortious interference with advantageous relations, violation of the

claims, arguing in part that the New Hampshire Uniform Trade Secrets Act, customers that Mortgage Partners “had been contacting them, discussing

that are “based upon the [defendants’] alleged misappropriation of [Mortgage construed RSA 350-B:7 as providing that any of Mortgage Specialists’ claims with advantageous relations and violation of the CPA. See RSA 350-B:7. The trial court but vacate it to the extent that it dismissed the claims for tortious interference RSA ch. 350-B (NHUTSA), preempted Mortgage Specialists’ claims for

Prior to trial, the defendants moved to dismiss Mortgage Specialists’ working for Mortgage Partners, Mortgage Specialists received reports from

extent that it dismissed the claims for conversion and breach of fiduciary duty,

Specialists’ customers and their mortgages. While Davey and Carbone were of documentation containing confidential information about Mortgage Davey and Carbone were working for Mortgage Specialists, each retained copies Mortgage Specialists alleged the following relevant facts in its writ: While

the trade secrets claim alone. We affirm this decision of the trial court to the the defendants’ motion to dismiss, allowing Mortgage Specialists to proceed on 2005); and breach of fiduciary duty. However, the trial court granted, in part, Hampshire Consumer Protection Act (CPA), see RSA ch. 358-A (1995 & Supp. tortious interference with advantageous relations; violation of the New defendants: misappropriation of trade secrets, see RSA ch. 350-B; conversion; Mortgage Specialists asserted the following claims against the

III. Preemption of Other Claims preempted by the NHUTSA.

p. 8 proprietary’ information,” each of the common law and CPA claims is

customers.

the alleged misappropriation of alleged ‘trade secrets’ or ‘confidential and that because “every one of [Mortgage Specialists’] claims [is] based entirely on because all such remedies conflict with the NHUTSA. Accordingly, they argue

expressed in the words of the statute considered as a whole.

of confidential information and goodwill and improper competition for

the overall legislative scheme and not in isolation. premised upon misappropriation of ‘confidential information and trade secrets’”

statutory interpretation, we are the final arbiters of the legislature’s intent as

statutory trade secrets, but also upon the defendants’ alleged misappropriation were not based solely upon the defendants’ alleged misappropriation of finding of a statutory trade secret, the claims were not preempted because they Jerome, 150 N.H. 626, 628-29 (2004). The NHUTSA, which is New

its words their plain and ordinary meanings, and interpret it in the context of preempts all “other remedies and theories of recovery in which liability is Corp., 152 N.H. at 116. We examine the language of the statute, ascribing to within the meaning of the NHUTSA, Woodview Dev.

We begin our review by interpreting RSA 350-B:7. In matters of

Mortgage Specialists argues that, even if preemption is not contingent upon the

The defendants argue that, pursuant to RSA 350-B:7, the NHUTSA 350-B:7 is contingent upon the information at issue qualifying as a trade secret

that we review

was a “trade secret” within the meaning of the NHUTSA. Alternatively, claims because the parties disputed whether the misappropriated information argues that the trial court prematurely dismissed the common law and CPA

On appeal, Mortgage Specialists argues that preemption pursuant to RSA

of the NHUTSA. 114, 116 (2005). that the information in question qualifies as a trade secret” within the meaning de novo. See Woodview Dev. Corp. v. Town of Pelham, 152 N.H. here also involves the interpretation of a statute, which is a question of law inquiry that tests those facts against the applicable law. Id. The issue raised facts in Mortgage Specialists’ favor. See id. We then engage in a threshold facts pled are true, and we construe all reasonable inferences drawn from those Watchtower Bible & Tract Soc., 152 N.H. 407, 410 (2005). We assume that all susceptible of a construction that would permit recovery. See Berry v. ascertain whether the allegations pled by Mortgage Specialists are reasonably In reviewing the trial court’s grant of a motion to dismiss, our task is to

secrets, regardless of whether [Mortgage Specialists] successfully demonstrates chapter 350-B “displaces . . . claims that rely on the misappropriation of trade the same provision. p. 9 purpose of the UTSA as well as the construction that other courts have given to construing the language of the preemption provision, we must consider the

explicitly preempts only remedies for “misappropriation of a

secrets,

350-B:7, I, appears to support Mortgage Specialists’ argument because it NHUTSA. We acknowledge that, if read in isolation, the plain language of RSA that there has been a misappropriation of trade secrets in violation of the

“to effectuate its general purpose to make uniform the law with respect to the NHUTSA, but also the statutory directive that we must construe the NHUTSA UTSA, 14 U.L.A. 531-32 prefatory note (emphases added; quotation omitted). provision ignores not only the overall legislative scheme reflected in the know-how or other information maintained in confidence by another.” to protect against the wrongful disclosure or wrongful appropriation of trade Association began considering the need for “enactment of a uniform state law Prior to enactment of the UTSA, the Patent Section of the American Bar

provide that no claim is preempted unless and until a determination is made

preemption provision.”

(Emphasis added.) However, such a narrow construction of the preemption misappropriation of a trade secret. trade secret.”

misappropriation of a trade secret; Mortgage Specialists urges us to construe the preemption provision to

U.L.A. 651. Hereinafter, we refer to the two provisions interchangeably as “the civil remedies for misappropriation of a trade secret. This provision of the NHUTSA is identical to section seven of the UTSA. conflicting tort, restitutionary, and other law of this state providing See 14

(c) Criminal remedies, whether or not based upon misappropriation of a trade secret; or (b) Other civil remedies that are not based upon courts interpreting the UTSA’s preemption provision inform our analysis. among states enacting it.” RSA 350-B:8. Therefore, opinions rendered by (a) Contractual remedies, whether or not based upon purpose to make uniform the law with respect to the subject of [the NHUTSA] II. This chapter shall not affect:

I. Except as provided in paragraph II, this chapter displaces

RSA 350-B:7, entitled “Effect on Other Law,” states:

id.

1985), 14 U.L.A. 536-659 (2005), must be construed “to effectuate its general Hampshire’s codification of the Uniform Trade Secrets Act (UTSA) (amended above, do not support Mortgage Specialists’ position.

the history, purpose, and interpretation of the statutory scheme, as discussed

A.2d 894, 898 (Del. 2002) (rejecting argument that preemption is contingent 1911997, at *12-*17 (Bradley, J., dissenting); Savor, Inc. v. FMR Corp., 812 (D. Del. 2005); see also, e.g., Burbank Grease II, ___ N.W.2d at ___, 2006 WL definition of a trade secret. Ethypharm S.A. France v. Bentley Pharmaceuticals, 388 F. Supp. 2d 426, 433 Sporleder, 605 N.W.2d 488, 491-92 (S.D.), cert. denied, 531 U.S. 821 (2000);

authority among courts that have considered the preemption provision is that II law.). We do not find these cases persuasive, however, and the weight of rising to the level of a statutory trade secret was left largely unprotected by the 2006 WL 1911997, at *3-*8 (Wis. July 13, 2006) (hereinafter Burbank Grease see also Burbank Grease Services, LLC v. Sokolowski, ___ N.W.2d ___, ___, Metals of Chicago Ltd. v. Airtek, Inc., 985 F. Supp. 827, 830 (N.D. Ill. 1997); Billings, Ramsey & Co., 191 F. Supp. 2d 652, 659 (E.D. Va. 2002); Combined Americas, 295 F. Supp. 2d 430, 437 (D. Del. 2003); Stone Castle v. Friedman,

by the UTSA if they involve information that does not meet the statutory courts that have held that common law and statutory claims are not preempted meet the statutory standard for a trade secret.” Mortgage Specialists urges us to adopt the position of a minority of action founded on allegations of misappropriation of information that may not secret as defined in the statute and thus to eliminate other tort causes of See RSA 350-B:7, I.

Mich. 2003). With the enactment of the UTSA, confidential information not information.” Bliss Clearing Niagara v. Midwest Brake Bond, 270 F. Supp. 2d 943, 948 (W.D. created more certain standards for protection of commercially valuable Corp., p. 10 108 F. Supp. 2d 968, 971 (N.D. Ill. 2000) (quotation omitted); see also common law remedies for theft of ideas.” Thomas & Betts Corp. v. Panduit July 13, 2006). As such, the UTSA “was meant to codify all the various Grease I), rev'd in part, ___ N.W.2d ___, ___, 2006 WL 1911997, at *3-*8 (Wis. v. Sokolowski, 693 N.W.2d 89, 98 (Wis. Ct. App. 2005) (hereinafter Burbank

misappropriation of a trade secret.” parameters of trade secret protection, and the appropriate remedies for preserve a single tort action under state law for misappropriation of a trade 2d 784, 789 (W.D. Ky. 2001). “[T]he purpose of the preemption provision is to

Auto Channel, Inc. v. Speedvision Network, LLC, 144 F. Supp.

The UTSA “also arose to create a uniform business environment that

(emphases added). the various . . . theories of noncontractual liability utilized at common law.” Id. secret and trade secret misappropriation, and a single statute of limitations for “[t]he contribution of the [UTSA] is substitution of unitary definitions of trade

been “uneven” and that there was “undue uncertainty concerning the The UTSA arose out of concerns that development of law on the subject had knowledge.’” Unikel,

p. 11 classified only as either a protected ‘trade secret’ or unprotected ‘general . . . B:7, II, the NHUTSA essentially creates a system in which “information is definition of a trade secret. Thus, except as otherwise provided in RSA 350-

of information, regardless of whether that information meets the statutory

valuable commercial information

that the NHUTSA preempts claims that are based upon the unauthorized use

B:7, II(a) continues to permit individuals and corporate entities to protect their

information meets the statutory definition of “trade secret” in the NHUTSA. making uniform the law among States that have adopted the UTSA, provides legislative scheme and construed in a manner that effectuates the purpose of contractually, regardless of whether such

867-68 (1998). Although this result may seem harsh, we note that RSA 350- Information” not Rising to the Level of Trade Secrets, 29 Loy. U. Chi. L.J. 841,

it.

Court of Appeals of Wisconsin in

We conclude that RSA 350-B:7, viewed in the context of the overall definition of a trade secret.” misappropriation of information “if the information does not meet the statutory Grease I, 693 N.W.2d at 97-102. find the opinion of the Wisconsin Court of Appeals persuasive. See Burbank ___ N.W.2d at ___, 2006 WL 1911997, at *12-*17 (Bradley, J., dissenting). We See Burbank Grease I, 693 N.W.2d at 97-102; see also Burbank Grease II, UTSA be construed to make uniform the law among the jurisdictions enacting in motivated the creation of the UTSA, in light of the legislative directive that the particularly for its adherence to the principles of uniformity and clarity that

do not find that position persuasive. Rather, we believe that the opinion of the clarity that motivated the creation and passage of the [UTSA].’” above, while other courts have agreed with the Wisconsin Supreme Court, we

Wisconsin's version of the UTSA does not preempt civil remedies for the ___, 2006 WL 1911997, at *3-*8. There, the supreme court held that is relevant to the issue presented here. See Burbank Grease II, ___ N.W.2d at Wisconsin Supreme Court recently reversed the portion of that opinion which Burbank Grease Services, LLC v. Sokolowski, we acknowledge that the Although we rely upon the opinion of the Court of Appeals of Wisconsin

Grease I, 693 N.W.2d at 99 (quoting Auto Channel, 144 F. Supp. 2d at 789).

trade secret were permitted, the result ‘would undermine the uniformity and unauthorized use of information that did not meet the statutory definition of a Betts, 108 F. Supp. 2d at 972-73 (same). “If a common law claim for at 948-49 (same); Auto Channel, 144 F. Supp. 2d at 788-89 (same); Thomas & upon finding of statutory trade secret); Bliss Clearing Niagara, 270 F. Supp. 2d applied this broadly. p. 12 NHUTSA. We are not persuaded that the preemption provision should be

available in New Hampshire,” by virtue of the preemption provision of the

duty based on the alleged misuse of confidential information are no longer

use of information derived from the plaintiff.” 1 R. Milgrim, redressing wrongs for improper conduct which in full or in part involves the

conversion, tortious interference, unfair trade practices and breach of fiduciary The defendants, however, argue that Mortgage Specialists’ “claims for special protection under New Hampshire law, independent of the NHUTSA. 12 mechanistically or overly conceptually. Our common law is richly flexible in

determine whether it is preempted by the UTSA.

information, the “confidential” nature of that customer information entitles it to preemption provisions can be somewhat worrisome if they are applied

misappropriation of information are preempted. 1474. of what a plaintiff claims are trade secrets.” Powell Products, 948 F. Supp. at preclude all common law claims that are connected with the misappropriation Secrets § 1.01[3][a] at 1-128.3 (2002). “It is neither necessary nor prudent to

any one of its claims is based solely upon the misappropriation of customer and improper competition for customers. It also argues that, to the extent that courts have done so). However, we disagree with those courts. “The information, but also upon the defendants’ alleged misappropriation of goodwill Marks, 948 F. Supp. 1469, 1474 (D. Colo. 1996) (discussing cases in which

Some courts have stated that all claims that are factually related to the

F. Supp. 2d at 946-47. N.W.2d at 99; see also Weins, 605 N.W.2d at 491; Bliss Clearing Niagara, 270

majority of courts that have examined this issue have not relied upon the label whether the claim “conflicts” with the NHUTSA. See RSA 350-B:7, I. The Whether a particular claim is preempted by the NHUTSA turns on

not based solely upon the defendants’ alleged misappropriation of customer

was preempted by the NHUTSA. determining whether any of Mortgage Specialists’ common law or CPA claims the information at issue constituted a trade secret under the NHUTSA prior to

of a statutory trade secret, its claims were not preempted because they were Specialists argues that, even if preemption is not contingent upon the finding Our review, however, does not end here. As noted above, Mortgage

preemption provision did not require that it make a determination of whether Accordingly, we agree with the trial court’s conclusion that the p. 13 Furthermore, we note that Specialists when they allegedly misappropriated its confidential information. that employer. Here, the defendants were no longer employed by Mortgage

confidential relationship they had with their employer while still employed by

information that gave rise to the action, but rather their breach of the

with the plaintiff, and not from the use or disclosure of any trade secrets.

the plaintiff. enactment of the NHUTSA. Thus, to the extent that competing products, all while at least one of the defendants was employed by Vigitron could be read to trade secrets and the misappropriation of confidential information,” citing Vigitron was decided prior to New Hampshire’s have “long recognized a distinction between a claim for the misappropriation of

at 631-32. There, it was not the defendants’ misappropriation of confidential

injunctive relief arose from the defendants’ breach of a confidential relationship may not have disclosed the plaintiff’s trade secrets, the plaintiff’s right to

Vigitron, 120 N.H. at 631. We held that, although the defendants

would compete with the plaintiff’s products and attempted to sell one of the In Vigitron, the defendants formed a partnership to sell products that allegations of misappropriation of customer information. It argues first that we it contends. a trade secret.” Mortgage Specialists from both Vigitron and Olsten Staffing is not as broad as Service, Inc., 145 N.H. 158, 160 (2000). However, the language relied upon by secrets,’” quoting National Employment Service Corporation v. Olsten Staffing communicated by the employer to the employee, but not involving trade which may be protected from competition is ‘confidential information to that which forms the basis for a claim of misappropriation of a trade secret. have “indicated that among the panoply of legitimate interests of an employer the elements of the claim require some allegation or factual showing in addition Vigitron, Inc. v. Ferguson, 120 N.H. 626, 631-32 (1980). It also argues that we

not preempted by the NHUTSA, even to the extent that they rely upon Mortgage Specialists contends that, despite the foregoing, its claims are factual showings of unauthorized use of . . . information or misappropriation of at 100 n.12. “based solely on, or to the extent [that it is] based on, the allegations or the support of the claim and have found that the claim is preempted when it is Powell Products, 948 F. Supp. at 1474; see also Burbank Grease I, 693 N.W.2d See, e.g., Weins, 605 N.W.2d at 492; Ethypharm, 388 F. Supp. 2d at 434-35;

also agree with courts that have concluded that a claim is not preempted where Niagara, 270 F. Supp. 2d at 946; Auto Channel, 144 F. Supp. 2d at 789. We Weins, 605 N.W.2d at 492; Ethypharm, 388 F. Supp. 2d at 433; Bliss Clearing 812 A.2d at 898; Frantz v. Johnson, 999 P.2d 351, 357 & n.3 (Nev. 2000);

Burbank Grease I, 693 N.W.2d at 100 n.12; see, e.g., Savor,

the majority of courts, which have looked to the facts alleged or proved in In determining whether a claim “conflicts” with the UTSA, we agree with claim is supported by the allegation that the defendants intentionally contacted

p. 14 defendants’ alleged misuse of Mortgage Specialists’ customer information. This

customer information. by the NHUTSA because it is based entirely upon the misappropriation of allegations in the writ to support a claim for conversion, the claim is preempted Specialists’ conversion claim, this claim is not based solely upon the such economic, business and/or contractual relations.” Unlike Mortgage “[d]efendants . . . [have] taken action to induce the disruption or termination of

alleged in support of each to determine whether each claim is based solely

Specialists’ customer information. Even if there are sufficient factual

with its customers”; (2) “[d]efendants are aware of those relationships”; and (3)

examine Mortgage Specialists’ common law and CPA claims and the facts

conversion claim, however, are that Davey and Carbone took Mortgage

Specialists has advantageous, economic, business and contractual relations tortious interference with advantageous relations because: (1) “Mortgage Mortgage Specialists’ writ next claims that the defendants are liable for

misappropriation of trade secrets or other information. Accordingly, we will of each claim to determine the extent to which the claim is based upon the preempted by the NHUTSA, a court must examine the facts alleged in support dominion and control of same.” The only factual allegations supporting the Specialists’ property and assets so as to deprive Mortgage Specialists of 350-B:7, II(a). conversion because they “have exercised dominion and control over Mortgage regardless of whether the information involved is a statutory trade secret. RSA Mortgage Specialists’ writ claims that Davey and Carbone are liable for preemption provision explicitly exempts contractual claims from preemption,

employer’s confidential information.

We conclude that, to determine whether a plaintiff’s claims are

confidential information from mere misuse unless it is a statutory trade secret. for the reasons discussed above – the common law no longer protects for misappropriation of confidential information. Furthermore, the NHUTSA contracts with employees, it does not recognize an independent cause of action that an employer may protect his or her confidential information through

an employer, which interests include maintaining the confidentiality of the and employee is valid only to the extent that it protects legitimate interests of Staffing, 145 N.H. at 160-61. We noted that a covenant between an employer contained in a contract between an employer and its employees. Olsten In Olsten Staffing, we examined the validity of a restrictive covenant

rising to the level of a trade secret, it has since been preempted by the NHUTSA create a distinct cause of action for the misuse of confidential information not preempted by the NHUTSA.

p. 15 writ involve only the misappropriation of customer information, the claim is

to dismiss. Therefore, because the factual allegations in Mortgage Specialists’ consider them in our review of the trial court’s grant of the defendants’ motion such facts were not alleged in Mortgage Specialists’ writ, and thus we cannot

note that even if these facts were sufficient to overcome a motion to dismiss,

preempted.

sole purpose of providing this information to Mortgage Partners.” However, we substantial amount of Form 1003s during his last days of employment for the supported by more than the mere misuse of customer information, it is not during their employment at Mortgage Specialists, and that Carbone acquired a not properly licensed in the State. Thus, to the extent that the CPA claim is allegation that Carbone informed Mortgage Specialists’ customers that it was

evidence at trial “that the defendants conspired . . . with . . . Mortgage Partners

Mortgage Specialists’ customer information. This claim is supported by the

customer information. Mortgage Specialists contends in its brief that there was however, are that Davey and Carbone took and used Mortgage Specialists’ violation of the CPA is not based solely upon the defendants’ alleged misuse of Specialists. The only factual allegations supporting the fiduciary duty claim, A:2, VIII. Like Mortgage Specialists’ tortious interference claim, its claim for business of another by false or misleading representation of fact.” RSA 358-

in them, and, “through their conduct,” they breached that duty to Mortgage

listed in RSA 358-A:2, I-XIV, including “[d]isparaging the goods, services, or

with confidential customer information, that trust gave rise to a fiduciary duty

(Supp. 2005). Such conduct includes, but is not limited to, the specific acts

preempted. liable for breach of fiduciary duty because Mortgage Specialists entrusted them mere misuse of Mortgage Specialists’ customer information, it is not in the conduct of any trade or commerce within this state.” RSA 358-A:2 [of] any unfair method of competition or any unfair or deceptive act or practice trade practices within the meaning of [the CPA].” The CPA prohibits the “use

Finally, Mortgage Specialists’ writ claims that Davey and Carbone are to the extent that the tortious interference claim is supported by more than the

violation of the CPA because “[t]he actions of [the] defendants constitute unfair

allegation that the defendants solicited Mortgage Specialists’ employees. Thus, customers that it was not properly licensed in the State, as well as the is also supported by the allegation that Carbone informed Mortgage Specialists’ Next, Mortgage Specialists’ writ claims that the defendants are liable for

(finding claim for tortious interference not preempted by UTSA). preempted by UTSA); Bliss Clearing Niagara, 270 F. Supp. 2d at 949-50 intentional interference with actual and prospective business relationships not

See, e.g., Ethypharm, 388 F. Supp. 2d at 434-35 (finding claim for

relations, and persuaded them to do business with the defendants. The claim Mortgage Specialists’ customers, with whom it claimed to have advantageous both originated and closed loans in violation of the court’s order.

p. 16 hot to have around.” Carbone denied the employee’s allegations.

of [Mortgage Specialists]” except in limited circumstances. Davey and Carbone soliciting or otherwise communicating with any customers or former customers anyone acting by or through them” from, among other things, “contacting,

had been shredded the previous night because the documents “got a little too The employee testified that Carbone told him in June 2003 that the documents Carbone’s copies were stored at the Signature Mortgage office until June 2003.

enjoining the “[d]efendants, and their employees, agents and affiliates, or to the sanction for the violation of the preliminary injunction, and remand. to the sanctions for destruction of documents as well as the order with respect below, we vacate the trial court’s order on the motion to reconsider with respect after the deposition. 16 Carbone was asked or ordered to return or secure the copies before, during, or Carbone admitted to having the copies in their possession. Neither Davey nor

April 2003. However, one of Carbone’s former employees testified that

2003. On April 16, 2003, the trial court issued a preliminary injunction order

in violation of the trial court’s discovery order. For the reasons discussed

2002, during their depositions in the Mortgage Partners litigation, Davey and

his copies destroyed by a document destruction company sometime prior to

Mortgage Specialists’ suit against the defendants was filed in February

court’s preliminary injunction order; and (3) the failure to produce client lists Specialists; (2) the origination and closing of loans in violation of the trial applications that they had taken when they departed from Mortgage contained information about Mortgage Specialists’ customers. In November July 2002, both took copies of an unknown number of documents that imposition of sanctions: When Davey and Carbone left Mortgage Specialists in shredded his copies shortly after the deposition. Carbone testified that he had destroyed the copies that he had in his possession. Davey testified that he Sometime after the November 2002 deposition, Davey and Carbone each

sanctions against them for: (1) the destruction of the copies of the loan

The record reflects the following facts relevant to the trial court’s

The defendants cross-appeal the trial court’s post-trial order assessing

IV. Sanctions

trial court for further proceedings consistent with this opinion. claims for tortious interference and violation of the CPA, and remand to the (1993). We thus vacate the trial court’s dismissal of Mortgage Specialists’ and do not warrant further discussion. See Vogel v. Vogel, 137 N.H. 321, 322 The defendants’ remaining arguments on this issue are without merit the trial court’s orders and the discovery process. p. 17 Specialists damages in an amount “appropriate for these flagrant violations” of

defendants’ utter disregard” for the same order, and to award Mortgage

of the preliminary injunction order “plus an appropriate sanction for the equal to the profits received by the defendants on each loan closed in violation from violation of the discovery order, to sanction the defendants in an amount

at trial.” judgment on the issue of sanctions until after hearing the testimony presented post-trial order on sanctions indicates only that the trial court “withheld

order, to award Mortgage Specialists “its costs and attorneys’ fees” resulting

not include any hearing transcripts or orders regarding this motion, and the

defendants in contempt” of the discovery order and preliminary injunction

court to impose sanctions for this conduct as well. The record on appeal does Mortgage Specialists’ customers after the date of the order, and asked the trial the orders of the court.” Counsel further argued that violation of the violating the trial court’s preliminary injunction order by closing loans for

defendants as [a] sanction for the destruction of evidence,” to “[h]old [the] Specialists asked the trial court to “[e]nter a default judgment against [the] destroyed evidence” relating to Mortgage Specialists’ claim. Mortgage

the requirement for the parties in the litigation to play by the rules and to obey from the defendants’ computers confirmed that the defendants had been

motion for contempt and further alleged that the defendants had “intentionally

concluded on September 28, 2004.

the heart of the process and the Court’s integrity in the litigation process and sanctions. Mortgage Specialists also alleged that the customer lists retrieved protect and vindicate the integrity of the court, stating that “these issues go to customer lists from their computers, and asked the trial court to impose 2004. At the hearing, counsel for Mortgage Specialists emphasized the need to had engaged in discovery abuse by falsely claiming that they could not produce The trial court held a hearing on the motion for sanctions on October 7,

and other relief, which restated the allegations contained in its supplemental

containing information about Mortgage Specialists’ customers. The trial testimony regarding the defendants’ destruction of their copies of documents testimony regarding the violations of the preliminary injunction, as well as

sanctions. In that motion, Mortgage Specialists alleged that the defendants

On October 6, 2004, Mortgage Specialists filed a motion for sanctions

The trial commenced on September 20, 2004. The trial court heard

filed a supplemental motion for contempt, entry of default judgment and defendants’ computers for customer lists. The next day, Mortgage Specialists ordered the defendants to allow Mortgage Specialists’ counsel to inspect the

Mortgage Specialists in relation to an earlier discovery order, the trial court On September 15, 2004, in response to a motion for contempt filed by because the court finds his actions more egregious.

p. 18 against Carbone and Signature Mortgage. Carbone’s fine is greater fines of $20,000 against Davey and Team Mortgage and $40,000 and undermine the integrity of the legal process, the court imposes

expenses. Additionally, because the defendants’ actions jeopardize

to reimburse the plaintiff $10,000 each for attorneys’ fees and proceedings. As a sanction, the court orders Davey and Carbone information, and most significantly injured the integrity of court

caused the plaintiff to expend time and money to recreate the injunction order].

court finds that both men and their companies acted in bad faith, timing of the destruction of the documents. Based on all this, the his company originated and closed in violation of the preliminary matters worse both Davey and Carbone lied under oath about the court five times the “gross profit” on each of the loans that [he or of the court, Davey [and Carbone are each] required to pay the

thwart [Mortgage Specialists’] prosecution of its case. To make and Carbone in contempt. Thus, in order to vindicate the integrity

interest of revenge, and not in vindicating the dignity of the Court.” “post-verdict attack on the Defendants is, respectfully, one founded in the Specialists’ emphasis on the integrity of the trial court, but contended that the destroyed in an effort to conceal information from the court and to foundation of our legal system. Accordingly, the court finds Davey Judge Coffey’s injunctive order and undermines the very faith or through negligent policing procedures, was in violation of Closing on loans originated after April 16, whether done in bad

found that Davey and Carbone both violated the order and ruled as follows: With respect to the violation of the preliminary injunction order, the trial court

motion for sanctions, filed October 12, 2004, they acknowledged Mortgage the outcome of the case, the court finds the documents were

ruled as follows:

the process has been violated.” In the defendants’ post-hearing objection to the Although the destruction of the documents caused no prejudice to the trial court should “send a message to [the defendants] that the integrity of authority and the integrity of the process.” Counsel concluded by arguing that discovery order. With respect to the destruction of documents, the trial court of documents, violation of the preliminary injunction order, and violation of the The trial court ultimately sanctioned the defendants for the destruction

and amounted to the defendants’ “thumbing of their noses at [the trial] court’s preliminary injunction “goes to the very heart of the integrity of the process” trial] court’s injunction.” p. 19 found “beyond a reasonable doubt that the defendants knowingly violated [the

defendants had not been denied due process. Nevertheless, the trial court also

The trial court rejected the argument that the sanctions were criminal in three times the defendants’ gross profits on loans closed in violation thereof.

opportunity to rule on issues and to correct errors before they are presented to attendant to a finding of criminal contempt. Before we reach the merits of the not raised at the earliest possible time.” the violation of the preliminary injunction, reducing the sanctions from five to trial court exercises its discretion to refuse to entertain the issue on Systems, 143 N.H. 540, 544 (1999); Tselios, 134 N.H. at 407. If, however, the Constructors, 146 N.H. 702, 704 (2001); Moulton-Garland v. Cabletron error, the issue has been preserved for our review. See, e.g., Gammans v. FHP issue earlier did not deprive the trial court of a full opportunity to correct its raised for the first time in a motion for reconsideration and failure to raise the

(1991). “[T]he rationale behind the rule is that trial forums should have an of court without adhering to the substantive and procedural requirements State v. Tselios, 134 N.H. 405, 407 contempt. They contend that the trial court found them in criminal contempt We have recognized that “parties may not have judicial review of matters excessive. The trial court reconsidered only the portion of its order relating to preliminary injunction order constituted findings of criminal, rather than civil, rather than civil, contempt. They also argued that the sanctions were because they raised it for the first time in their motion for reconsideration. and that the process had been flawed because the sanctions were for criminal, preserve the issue regarding the propriety of criminal contempt sanctions the sanctions sought by Mortgage Specialists prior to trial and failed to Mortgage Specialists argues that the defendants were aware of the nature of See State v. Blomquist, 153 N.H. ___, ___, 891 A.2d 469, 470-71 (2006).

and attorney’s fees for the destruction of documents and for the violation of the On appeal, the defendants argue that the trial court’s imposition of fines sanctions. They argued, for the first time, that the sanctions were improper

Mortgage Specialists’ reasonable attorney’s fees and costs.

The defendants moved for reconsideration of the trial court’s order on

with its discovery order to produce the customer lists, ordering them to pay Finally, the trial court sanctioned the defendants for their failure to comply respect to the sanctions for the destruction of documents.

p. 20 injunction, this issue was properly preserved for appellate review. propriety of the sanctions with respect to the violation of the preliminary 20

destruction of documents. of the hearing, no mention was made of the sanctions with respect to the neither granted nor denied the defendants’ motion for reconsideration with for violation of the preliminary injunction were improper. The trial court remainder of the order addressed only the defendants’ claim that the sanctions

documents. Therefore, because the trial court did not refuse to rule on the

defendants’ arguments that the trial court’s imposition of sanctions amounted Valley Mall Assocs., 144 N.H. at 654-55. Thus, we will reach the merits of the issue on reconsideration was an unsustainable exercise of discretion. See Mt. documents, we review only whether the trial court’s refusal to entertain the violation of the . . . injunctive order, at this time.” Throughout the remainder refused to entertain the same issue with respect to the destruction of However, because we conclude from our review of the record that the trial court 134 N.H. at 407; compare id. with Mt. Valley Mall Assocs., 144 N.H. at 655. defendants’ violation of this court’s restraining order.” (Citation omitted.) The See Tselios,

documents. to both the violation of the preliminary injunction and the destruction of both the violation of the preliminary injunction and for the destruction of accorded an opportunity to rule on the propriety of the sanctions with respect procedural and substantive formalities when it sanctioned the defendants for From this review of the record, we conclude that the trial court was

affirmative, the trial court stated, “All right. So I will hear you only on the

reconsideration, and I agreed only to reconsider my order regarding the violating an injunction, and discovery abuses. The defendant[s] moved for earlier assessed sanctions against the defendants for destroying evidence, In its order on the motion for reconsideration, the trial court noted, “I

on sanctions, argue that the trial court had failed to adhere to the requisite

the Mortgage Specialists versus Davey?” When counsel responded in the by asking counsel for the defendants, “You are appealing all these decisions in The trial court, at the hearing on the motion for reconsideration, opened

They did, however, in their motion for reconsideration of the trial court’s order criminal in nature prior to or during the hearing on the motion for sanctions. The defendants did not argue that the sanctions proceedings were

discretion standard). v. Lambert, 147 N.H. 295, 296 (2001) (explaining unsustainable exercise of Mall Assocs. v. Municipality of Conway, 144 N.H. 642, 654-55 (2000); cf. State uphold that decision absent an unsustainable exercise of discretion. Mt. Valley reconsideration due to the party’s failure to raise it at an earlier time, we will p. 21 21

contempt.

view. contempt is a question of law, which we review the defendants. Whether a sanction amounts to a finding of indirect criminal trial court was not required to adhere to the procedural formalities argued by Waters, Inc., 118 N.H. 282, 285 (1978). requirements to which the court must adhere. Town of Nottingham v. Cedar distinction between direct and indirect contempt lies in the procedural presiding judge could not take judicial notice. Id. The significance of the

Id. Thus, indirect contempt arises from events of which the

and without the judge having full personal knowledge of every element of the judge. Id. An indirect contempt is committed outside the presence of the court Id. All elements of the contempt must be personally observable by the contempt is one committed in the presence of the court and in its immediate Contempt is either direct or indirect. Bonser, 124 N.H. at 808. A direct will be upheld absent an unsustainable exercise of discretion). that the sanctions were for civil, rather than criminal, contempt, and thus the in specific situations involving direct criminal contempt, its decision to do so 270-71 (1992). formalities and instead utilizes summary contempt procedures, as is permitted order, of which the defendant had knowledge. State v. Wallace, 136 N.H. 267, contempt, the defendant must have intentionally failed to comply with a valid also a question of law, which we review dignity” of the court. Id. (quotation omitted). To be punished for criminal adhering to the requisite substantive and procedural formalities. criminal contempt, however, is punitive and to vindicate the “authority and remedial, coercive, and for the benefit of the plaintiff. Id. The purpose of 124 N.H. 796, 808 (1984). In civil contempt, the purpose of the punishment is the character and purpose of the punishment imposed. Bonser v. Courtney, The two classes of contempt, civil and criminal, are distinguishable by

of the trial court’s imposition of sanctions, Mortgage Specialists first argues 146 N.H. 105, 106 (2001) (where trial court bypasses certain procedural

court adhered to the requisite procedures in a criminal contempt proceeding is of criminal contempt for the violation of the preliminary injunction without defendants with all of the requisite procedural protections. Whether the trial reconsideration, and second, whether the trial court erred by making a finding even if the sanctions were for criminal contempt, the trial court provided the contempt issues with respect to the destruction of documents on O’Connell, 147 N.H. 270, 272 (2001). Mortgage Specialists also argues that

In response to the defendants’ arguments regarding the criminal nature

unsustainably exercised its discretion in refusing to entertain the criminal to a finding of criminal contempt to determine, first, whether the trial court and because the trial court found that the destruction was not prejudicial to

p. 22 documents in question were not subject to any preservation or discovery order

contempt; (2) the finding of criminal contempt was improper because the adhere to the requisite procedural safeguards in finding them in criminal documents, the defendants argue on appeal that: (1) the trial court failed to

prosecute a criminal contempt action arising from that order.

between the public and the defendant, and are not a part of the original cause.” With respect to the finding of criminal contempt for the destruction of

months in the house of correction if the contemnor is found guilty. A. Destruction of Documents

274. A private attorney who represents the beneficiary of a court order cannot Rogowicz, 147 N.H. at 273, the private attorney must be disinterested, id. at contempt proceeding may be initiated and prosecuted by a private attorney, (quotation omitted); see Rogowicz, 147 N.H. at 273. Although a criminal Young v. United States ex rel. Vuitton et Fils S.A., 481 U.S. 787, 804 (1987)

“[C]riminal contempt proceedings arising out of civil litigation are

and describing the charge as one for criminal contempt. Id. of hearing and the essential facts constituting the criminal contempt charged, court intends to punish the contempt by imposing a sentence greater than six incrimination also applies. Id. The contemnor is entitled to a jury trial if the is entitled to be represented by counsel. Id. The right against selfprove the elements of the case beyond a reasonable doubt. Id. The contemnor misdemeanor. Town of Nottingham, 118 N.H. at 286. The prosecutor must An action for indirect criminal contempt should be treated as a

95(b); Town of Nottingham, 118 N.H. at 286. publicly defies its authority. defendant a reasonable time for the preparation of a defense. Super. Ct. R. Town of Nottingham, 118 N.H. at 286. The notice must also allow the

The alleged contemnor must first be provided notice, stating the time and place procedural requirements of a criminal proceeding. Rogowicz, 147 N.H. at 273. certain procedural formalities. Generally, the proceeding must satisfy the An indirect criminal contempt cannot be punished without adherence to

administration of justice. Id. at 285-86. contumacious behavior must constitute a threat that immediately imperils the

contemnor’s conduct openly threatens the orderly procedure of the court or summary contempt power, however, should be used only when the of the conduct and the need for prompt action. Lieber, 146 N.H. at 107. The personal knowledge of the contemnor’s conduct and because of the immediacy 95(a). Certain procedural formalities may be bypassed in light of the court’s A direct contempt may be punished summarily. Id.; see Super. Ct. R. proceedings.” All of this is indicative of a finding of indirect criminal contempt. p. 23 the trial court found that the defendants “injured the integrity of court the fines were punitive and not remedial in nature. In imposing these fines,

the trial court found his actions to be more egregious, further indicates that

about the timing of the destruction of documents, Mortgage Specialists did not

with the attorney’s fees. The increased fine imposed upon Carbone, because

imposition of fines in part upon its finding that the defendants lied under oath

did not order that these fines be paid to Mortgage Specialists, as it had done trial court in the same order were all to be paid to the court, and the trial court appears that they were to be paid to the court. The other fines imposed by the for an unsustainable exercise of discretion. the destruction of documents, we review its refusal to do so on reconsideration

motion for sanctions. Although the trial court appears to have based the evidence was presented, possibly as late as Mortgage Specialists’ post-trial for sanctions on this issue appears to have been provided some time after the

not clear from the trial court’s order to whom these fines were to be paid, it

during the course of the trial, the first notice to the defendants of the potential

defendants to reimburse Mortgage Specialists for attorney’s fees. Although it is fines were punitive in nature because the trial court separately ordered the would be an improper sanction for the destruction of documents. Because the contempt with respect to the destruction of documents. It appears that the did not adhere to adequate procedures, or that an award of attorney’s fees sought by Mortgage Specialists’ were for criminal contempt, that the trial court

While the trial court heard evidence regarding the destruction of documents procedural formalities in arriving at this finding of indirect criminal contempt. The trial court also appears to have failed to adhere to the requisite

that the trial court may have made an improper finding of indirect criminal

reconsideration. Prior to that time, they had not argued that the sanctions

address it.

The trial court’s order imposing sanctions upon the defendants suggests

sanctions for the destruction of documents for the first time in their motion for Lambert, 147 N.H. at 296 (quotation omitted). untenable or unreasonable to the prejudice of [the defendants’] case.” discretion standard). The trial court’s decision is not sustainable if it is “clearly N.H. at 654; cf. Lambert, 147 N.H. at 296 (explaining unsustainable exercise of because the defendants did not adequately brief this issue, we decline to See Mt. Valley Mall Assocs., 144 the trial court for the destruction of documents was excessive. However, their notice of appeal, the defendants also argue that the sanction imposed by

As explained above, the defendants objected to the criminal nature of the

See Appeal of AlphaDirections, 152 N.H. 477, 483-84 (2005).

the destruction of documents was not supported by sufficient evidence. In Mortgage Specialists’ case; and (3) the award of attorney’s fees as a sanction for parties.

p. 24 vindicate the integrity of the court” rather than to vindicate the rights of the clearly states that the trial court chose to impose these fines “in order to the defendants’ favor. Most importantly, the language of the trial court’s order

injunction order was presumably dissolved when the jury returned a verdict in

violation of the preliminary injunction were excessive.

such a situation beyond this court’s opinion in to Mortgage Specialists. The fines were not coercive, as the preliminary exceedingly rare, and that trial courts have little guidance as to how to handle remedial nor for the benefit of Mortgage Specialists, as they were not to be paid inadvertent imposition of sanctions for indirect criminal contempt is violation of the order – were punitive in nature. The fines were neither

preliminary injunction order; and (3) the fines imposed as a sanction for

finding beyond a reasonable doubt that the defendants willfully violated the erroneous because there was insufficient evidence to support the trial court’s defendants in criminal contempt; (2) the finding of criminal contempt was

proceedings prior to the trial court’s order imposing sanctions. Given the presuppose a finding of criminal contempt. The fines imposed by the trial defendants did not have sufficient notice of the actual nature of the sanctions at an earlier time than on reconsideration, it appears that the See Town of Epping v. Harvey, 129 N.H. 688, 691-92 (1987). we should review this issue for plain error. In light of this conclusion, we need not address the defendants’ argument that

failed to adhere to the requisite procedural safeguards in finding the

The sanctions for the defendants’ violation of the preliminary injunction

the defendants may have been able to raise the issue of the propriety of

exercise of discretion in refusing to entertain these issues on reconsideration.

the contempt despite its status as an interested party.

preliminary injunction, the defendants argue on appeal that: (1) the trial court With respect to the finding of criminal contempt for the violation of the

B. Violation of the Preliminary Injunction

at 286-87 – we conclude that the trial court committed an unsustainable

Finally, it appears that the trial court either erroneously attempted to utilize described the claims against the defendants as charges of criminal contempt.

The procedures utilized by the trial court in imposing sanctions for the

trial motion for sanctions. Neither Mortgage Specialists nor the trial court ever specifically allege this factual basis for the imposition of sanctions in its postone for criminal contempt. p. 25 a charge of criminal contempt where the notice does not describe the charge as

sought may be insufficient to provide a defendant adequate notice that he faces

prosecutor for prosecution, he or she cannot actually prosecute those charges. facts constituting the contempt charged and the nature of the punishment charges arising from that order should be referred to a public or private representing the beneficiary, may argue to the court that criminal contempt

never uttered by Mortgage Specialists or the trial court. Notice of the essential the defendants’ motion for reconsideration, the words “criminal contempt” were against the defendants. Although the beneficiary of a court order, or counsel seeking a finding of criminal contempt from the trial court. However, prior to

out of which the contempt arose, “and the parties to the action out of which the

id. at 274-75. sanctions that are in the nature of criminal, rather than civil, contempt. See the beneficiary of the court order or his or her counsel to continue to pursue trial court may choose not to refer the case for prosecution, it may not allow the executive branch for prosecution.” Rogowicz, 147 N.H. at 273. While the N.H. at 285-86, “criminal contempt should, in the first instance, be referred to may be adjudicated utilizing summary procedure, see Town of Nottingham, 118 at 830. Thus, with the exception of the limited cases of criminal contempt that present evidence and argument regarding the criminal contempt charges sanctions, the defendants could have understood that Mortgage Specialists was to refer the matter for prosecution and in permitting Mortgage Specialists to Peterson, 153 N.W.2d

576 F.2d 1, 5 (1st Cir. 1978). Criminal contempt is collateral to the proceeding N.W.2d 825, 830 (Minn. 1967); Ramos Colon v. U.S. Atty. for D. Puerto Rico, conclude that the trial court did not do so. Union, Etc., 298 S.E.2d 827, 830 (W. Va. 1982); Peterson v. Peterson, 153 See Rogowicz, 147 N.H. at 274-75; see also, e.g., State ex rel. Koppers v. Intern.

element of the contempt.

that the various motions filed by Mortgage Specialists sought punitive Moreover, even if the notice was adequate, the trial court erred in failing

N.H. at 286.

court and without the trial court having full personal knowledge of every Thus, the alleged contempt was committed outside the presence of the trial loans originated after April 16,” in violation of the preliminary injunction order.

It is unclear whether the defendants received the requisite notice. Given

Because the sanctions were for indirect criminal contempt, the trial court

contempt. The trial court fined the defendants because they “[c]los[ed] on The sanctions were also for indirect, rather than direct, criminal p. 26 26

thus we decline to address them. excessive. However, the defendants did not adequately brief these issues, and

by the trial court for violation of the discovery order was incorrect and

BRODERICK, C.J.