Mr. Zaruk also competed with the Bonus Company through his engagement with the Weinberger Law Firm. Previously, this firm did not deal with proactive charges of municipal taxes such as those handled by the company. The firm and the Bonus Company examined the possibility of cooperation, but this examination was stopped after Mr. Zaruk began working at the firm. And now, immediately after his termination of employment, he, together with the Weinberger firm, contacted the treasurers of various authorities. Shortly thereafter, Mr. Nissenbaum also left the Bonus Company, and formed a partnership with Mr. Zaruk. Mr. Asael also left his job at HeverH and began working with him, followed by Mr. Cyrus. Certainly, this is not a "miraculous coincidence", but rather the product of Mr. Zaruk's deliberate and improper action, with the full cooperation of the firm.
Bonus added and detailed various examples of relationships with municipalities and water corporations that establish unacceptable competition on Mr. Zaruk's part and the exploitation of the knowledge he accumulated in the company in order to act against it.
- It follows that Mr. Zarrouk is not entitled to any payment because he grossly violated the terms of non-competition in the 2009 agreement, as well as the duty of confidentiality and the duty of trust, while establishing a partnership whose purpose is to compete with a bonus company. This breach entitles the bonus company to receive all the proceeds it received for this breach. This is in fact an agreed compensation that the court must enforce and not interfere.
- Zarrouk did not bring evidence of "proven work" in connection with the assessments for which he is demanding payment in this claim, and therefore there is no room for any calculation. In practice, it was proven that the work done by him was improper, and therefore the company was forced to invest considerable resources of its own. According to the minimal estimate, this is more than 4, 000 work hours that were required only in order to advance the handling of the cases after the plaintiff's departure, and this component is offset in relation to the defendant in the main claim.
- Zaruk did not prove a right to any monetary consideration in respect of the assessments in Appendix 8 to the claim. He did not prove the mechanism of calculation that he claims, and therefore there is also no reason to appoint an accountant as requested by him, since it is not clear how he will have to perform the calculation. In accordance with the agreement from 2009, the reduction of Mr. Zaruk's right to future profits must be calculated, in view of the costs of his replacements in the position. There is no reason to accept the calculations of CPA Slobodiansky on behalf of the plaintiff in this matter.
Ordinarily, the expenses should also have been taken into account in calculating the profit due to the plaintiff, but he is not entitled to any profit and even owes the funds to a bonus company. In any event, the expenses were detailed in the opinion of CPA Schlepper, and all the expense certificates were provided to Mr. Zaruk as part of the disclosure of the documents, and were used by CPA Schlefer in drafting his opinion. In its summaries, the bonus company notes how the various calculations should be made, inter alia in accordance with his position, including how to subtract the costs of the employees who replaced him from the consideration he is entitled to; and other additional costs that must be taken into account.
- Against the background of all this, it was argued that the main claim should be dismissed, and the plaintiff should be charged with the defendants' expenses.
The main arguments of the bonus company in the counterclaim
- According to Bonus, in light of the court's decision to split the hearing of the counterclaim between the question of liability and the question of the amount of damage, after its position on the question of liability is accepted, it will be appropriate to set the case for further clarification in order to determine the payment due to it. In fact, in its decision, the court blocked the possibility of a bonus company to prove - by summoning the treasurers of the local authorities - the scope of the engagement between those authorities and the counter-defendants, as well as the scope of the income that arose for them as a result of the prohibited competition with it.
- The Bonus Company reiterated its claims, which were detailed in its summaries in the main lawsuit, with regard to the breach of the competition clause and the improper actions carried out by Mr. Zaruk and the other counter-defendants.
- In any event, the counter-defendants (Mr. Zaruk and Mei-Ad( exaggerate the income they allegedly generated. To this, it should be added that all the counter-defendants breached the confidentiality obligations in the agreement, using the company's trade secrets. These secrets include, among other things, the development of a skill that will make it possible to avoid investing time in examining properties that are unlikely to yield a decent return down the road. It was established that the information by means of which a bonus company operates is not in the possession of the common person, and hence it is a trade secret. Zaruk and Mei-Ad had full access to the scope of the charges sent in connection with the engagement with the company's customers, its work methods, and the tests it conducted. The scope of the charges itself rises to the definition of a trade secret, even according to the counter-defendants' approach.
- Moreover, a great deal of negligence was established in the manner in which Mr. Zaruk carried out the work, both quantitatively and qualitatively. Thus, hundreds of significant cases from the list were closed without generating a worn penny of income. The quality of Mr. Zaruk's work was poor, and caused the company to suffer actual damages. Treatment was slow, and potential moles suffered from neglect. The total damage caused as a direct result of Mr. Zaruk's negligence amounts to ILS 1, 252, 456.92, and the counter-plaintiff presented details to substantiate her claims.
- The counter-defendants violated the terms of the prohibition of competition and deliberately concealed the income that Mr. Zaruk received as a result of the breach. There is no room for a distinction he made between the establishment fees - which replaced, as it were, the relevant charges - andthe charges that are the subject of the litigation. The charges for the establishment fees are also relevant to the accounting, according to Mr. Zaruk himself. A bonus company also dealt with establishment fees, and Mr. Zaruk's work in this field, after he retired, constitutes a direct breach of his obligation not to compete with it.
- The counter-plaintiff has additional causes of action by virtue of the tort of causing breach of contract and by virtue of the laws of unjust enrichment.
Thus, Mr. Zaruk led to the fact that other employees who worked with the company violated the non-compete clause to which they were obligated. Despite the denials, a real partnership was established between the counter-defendants that competed directly with a bonus company. Adv. Bertenthal, of the Weinberger-Bertenthal law firm, testified in his cross-examination that the firm began to cooperate with Mr. Zaruk, with an agreement to divide the profits between the parties, all in the areas of activity in which the company was engaged. This cooperation also included attempts to coax its clients to work with the counter-defendants. In its summaries, the Bonus Company detailed the prohibited activity that was carried out vis-à-vis various authorities and water corporations. She explained how the elements of the tort of causing a breach of contract existed. She further added that the profits made by the counter-defendants as a result of their improper activity constitute extrajudicial enrichment, the fruits of which she is entitled to receive.
- Against this background, the counter-plaintiff petitioned that it be determined that Mr. Zaruk and Mei-Ad had violated the confidentiality and non-compete clause in the agreement, and that the case be set for further investigation in order to formulate the monetary compensation due in respect of this. She also petitioned to order Mr. Zaruk to pay compensation in the amount of ILS 1, 252, 456 for his negligence. In addition, statutory compensation in the amount of ILS 100, 000 was demanded from the Weinberger firm in accordance with theCommercial Torts Law, 5759-1999 (hereinafter: the Commercial Torts Law), for causing a breach of the agreement.
The main arguments of Mr. Zaruk and Mei Ad in the counterclaim
- The counterclaim at hand was intended to artificially create a partial offset claim, taking into account the debt demand raised by Mr. Zaruk. It was only in September 2016 that Bonus claimed for the first time that Mr. Zaruk had stolen its trade secrets. However, even from that date, she did nothing to prevent the alleged theft, which means that she too did not believe in the justification of her claims.
- Throughout the process, the bonus company refrained from entering into a proper accounting process. She tried to evade her obligation to pay Mr. Zaruk what he deserved. She refused to disclose true data. This is a well-known pattern of operation of the company even vis-à-vis other parties that have contracted with it in the past.
- From a procedural point of view, the counter-plaintiff exceeded the scope of the pages set for her summaries, and she should be charged with expenses in respect of this.
- A bonus company has not established theft of any trade secret, or breach of the non-compete clause. She did not present a basic detail of the secrets at her disposal. She also claimed a "customer list", a "contact list" and a "supplier list", while making do with vague and general statements regarding their confidentiality. The counter-defendants, for their part, proved that the area of activity that is the subject of the dispute is devoid of trade secrets. This is in the area of development levies. Those working in this field are well known, since these are local authorities and water corporations. The activity itself is also regulated in accordance with the law and case law, and the means by which the scope of collection is formulated are not at all sophisticated, and no real training is required in order to learn the craft.
In any event, the knowledge, experience and skills that Mr. Zaruk accumulated during the provision of services to a bonus company belong to him, and their use cannot be considered theft. In the circumstances that have been proven in our case, Mr. Zaruk was certainly entitled to compete with a bonus company. He did not violate the non-competition clause in the second agreement, and in any case it is invalid. As far as the cooperation with Weinberger is concerned, this is a project that is limited in time, different in its fields of activity, and fails in its business results. Certainly, it cannot serve as any basis for charging the counter-defendants. The allegations regarding some kind of improper solicitation by the workers are also unfounded.
- The counter-defendants proved that a bonus company added a non-competition clause in every engagement agreement it made, regardless of the position, salary and status of the employee or service provider. This proves that its approach was not matter-of-fact and did not come to protect legitimate interests, but rather to prevent competition while taking advantage of the power disparity between it and its employees. From this it is necessary to conclude that the said non-competition clauses are invalid, and they should be declared null and void because they contradict public policy. In addition, the Bonus Company acted in bad faith, and chose to enforce the non-compete clause only against the plaintiff and not against his replacements.
- For the sake of caution, even if there is room to enforce the stipulation, according to its language, it does not contain a sanction of denial of consideration due to the plaintiff by virtue of the second agreement. It establishes (in accordance with clause 5 of the second agreement( a concrete sanction whereby Mr. Zaruk will be obliged to pay the bonus company only the scope of the receipts he received in respect of that alleged competitor business. and these funds should be deducted from the significant debt of the bonus company to him, as detailed in the main claim.
- In addition, it was proven that Mr. Zaruk did not solicit the three employees to leave their jobs at a bonus company and join him. They were fired or left on their own initiative due to their dissatisfaction and because of disputes that arose between them and Mr. Goldian.
- The claim of the Bonus Company for negligence in the work of Mr. Zaruk constitutes an extension of the front.
- Against the background of all this, it was argued that the counterclaim should be dismissed and the counter-plaintiff should be charged with significant expenses.
The main arguments of the Weinberger firm in the counterclaim
- According to the firm, this is a baseless, petty and troublesome lawsuit, intended to exert improper pressure on Mr. Zaruk, and to allow the bonus company to be exposed to confidential documents and information of the firm. It was also claimed that there was no cause of action and rivalry as far as the matter was directed at the Weinberger firm. This firm specializes in the field of municipal law, including development levies, betterment levies, building fees and construction fees. There is no basis for the counter-plaintiff's claim regarding the "copying" of areas of activity while exploiting trade secrets of one kind or another.
- The bonus company did not specify what the violated trade "secret" was and what it consisted of. On the merits of the matter, the claims of the existence of such a secret must be rejected. The relevant customers are open, and there is nothing secret about the methods. And even if the existence of one trade secret or another was proven, it was not proven that the Weinberger firm made use of it. In addition, some of the employees to whom the counterclaim refers were not employed by the firm at all, but by separate entities that are not parties to the proceeding. At the basic level, the firm is also not a party to any non-compete agreement with a bonus company.
The field of establishment fees - in which the firm operates - is an independent and separate field of activity, with a regulatory and legal framework that is fundamentally different and distinct from the field of development levies, and a bonus company has not dealt with or developed any expertise in respect of it. Therefore, it cannot be claimed that the firm stole a trade secret from a bonus company or caused a breach of a non-compete clause in this field, or breached confidentiality of one kind or another.
- After examining all the customers against whom the trade secret is alleged to have been breached, it emerges that there is no factual and legal basis for the claims of theft, breach of contract, or use of confidential information. This is because most of the engagements were with public bodies in accordance with formal procedures, and without proof of any dependence or material connection between the said engagements and a bonus company. In addition, some of the clients were not customers of the counter-plaintiff at all, and some of them did not undertake to rely on her exclusive services. Certainly, the Ministry could have provided them with services, or negotiated with them regarding the provision of such services.
Hence, there is no factual and legal basis to impose liability on the Weinberger firm for the tort of causing breach of contract. The ministry did not cause their violation, certainly not knowingly. Even if the cause of action was proven, there was room to postpone the claimed compensation, since the relevant employees retired from the bonus company by virtue of their own will.