Oral Agreements, Unjust Enrichment, and Presale Funds: Key Takeaways from Smith v. Bodyworks Publishing LLC (CAM-L-1704-23)

Factual and Procedural Background

The dispute in Smith v. Bodyworks Publishing LLC centered on two failed book projects arising from the notoriety of Atilis Gym, which gained national attention for defying COVID-19 shutdown orders in 2020. Ian Smith (plaintiff) and Frank Trumbetti, co-owners of the gym, were approached by Barbara Jean Dowlen, a self-styled professional writer and publisher, to ghostwrite a book about their experience.

Key facts:

• Oral Agreements: In May 2020, Smith and Trumbetti orally agreed with Dowlen to produce "Two Dumbb Gym Owners" (TDGO), with proceeds to be split. Dowlen controlled the presale process and deposited all funds into her business (Bodyworks Publishing LLC) account, to which Smith and Trumbetti had no access.
• Presale Funds: Dowlen used presale funds for both project-related and unrelated personal expenses. She did not segregate the funds or provide regular accounting to Smith or Trumbetti.
• Project Collapse: Dowlen never produced a draft of TDGO. Following a falling out between Smith and Trumbetti in June 2022, Smith canceled the project.
• Second Book Attempt: Dowlen then agreed to ghostwrite Smith's personal memoir, "Find Your Hill" (FYH), again under an oral agreement. Presales began in late 2022; Dowlen provided an initial draft, which Smith substantially rewrote.
• Breakdown and Self-Publication: Disputes arose over manuscript quality, Dowlen's credentials, and handling of presale funds. Smith ultimately self-published FYH in May 2023, distributing books to presale customers and incurring printing/shipping costs.
• Escrow and Litigation: Approximately $35,000 was placed in defense counsel’s trust account, not directly from original presale funds. Smith sued Dowlen and Bodyworks in June 2023, asserting fraud, breach of contract, and other claims. Defendants counterclaimed for breach of contract, unjust enrichment, and additional causes.

After a multi-day bench trial in early 2026, the court rendered judgment on all claims and counterclaims.

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Legal Issues Before the Court

The court was presented with the following central legal issues:

1. Whether Dowlen and Bodyworks committed fraud, negligent misrepresentation, breach of contract, breach of the implied covenant of good faith and fair dealing, or tortious interference.
2. Whether Smith was entitled to the full presale proceeds, or whether Dowlen and Bodyworks were entitled to compensation for their contributions.
3. Whether Defendants were entitled to damages or equitable relief on their counterclaims for breach of contract, unjust enrichment, promissory estoppel, tortious interference, conversion, and misappropriation of trade secrets.
4. How to allocate the presale proceeds among the parties, especially given the oral nature of the agreements and the lack of clear accounting.

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Legal Standards Applied

The court meticulously named and applied several legal standards and tests, including:

Breach of Contract

To establish breach of contract, the plaintiff must prove:

1. Existence of a contract containing certain terms;
2. Plaintiff’s performance of contractual obligations;
3. Defendant’s failure to perform (breach);
4. Loss to plaintiff caused by the breach.
   See Model Jury Charges (Civil), 4.10A; Globe Motor Co. v. Igdaley, 225 N.J. 469, 482 (2016).

Implied Covenant of Good Faith and Fair Dealing

Plaintiff must prove that the defendant, without legitimate purpose:

1. Acted with bad motives, intentions, or engaged in deception or evasion in contract performance;
2. Denied plaintiff the bargain intended by the parties.
   Model Jury Charges (Civil), 4.10J.

Tortious Interference with Prospective Economic Advantage

Plaintiff must show:

1. Existence of a reasonable expectation of economic advantage;
2. Defendant’s knowledge of that expectancy;
3. Defendant’s wrongful, unjustified interference;
4. Probability that, but for the interference, plaintiff would have realized the advantage;
5. Damages sustained.
   Model Jury Charges (Civil), 3.30A; Printing Mart-Morristown v. Sharp Elec. Corp., 116 N.J. 739, 751-52 (1989).

Unjust Enrichment

Plaintiff must show both that:

• Defendant received a benefit;
• Retention of that benefit without payment would be unjust, and plaintiff expected remuneration at the time of conferral.
  VRG Corp. v. GKN Realty Corp., 135 N.J. 539, 554 (1994).

Promissory Estoppel

Plaintiff must show:

1. Clear and definite promise;
2. Expectation of reliance;
3. Reasonable, detrimental reliance;
4. Substantial detriment resulted.
   Toll Bros., Inc. v. Bd. of Chosen Freeholders, 194 N.J. 223, 253 (2008).

Conversion / Misappropriation of Trade Secrets

Conversion: Wrongful exercise of dominion or control over another’s property, to the exclusion of the owner’s rights.
Chi. Title Ins. Co. v. Ellis, 409 N.J. Super. 444, 454-55 (App. Div. 2009).

Trade Secrets: Information with independent economic value, not generally known, subject to reasonable efforts to maintain secrecy.
N.J.S.A. 56:15-2.

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Court’s Reasoning and Application of Standards

Breach of Contract and Good Faith

The court found that both book projects (TDGO and FYH) were governed by oral agreements with minimal terms. The court concluded:

• Dowlen did not breach the agreements, as there was no express requirement to segregate presale funds or provide detailed financial accounting.
• Smith, who ultimately self-published FYH, was not in breach for doing so, as the published version was substantially his own work.
• Neither party acted in bad faith or with deceptive intent. As the court observed, “Neither Smith nor Dowlen acted with bad motives or intentions in performing their respective obligations.”

Tortious Interference

Both sides’ tortious interference claims failed. The court found no wrongful conduct by either party that deprived the other of a reasonable economic advantage. Dowlen's handling of customer lists and presale funds was not "wrongful or without justification," and Smith’s actions did not cause defendants to lose clients.

Unjust Enrichment

This was the only claim on which the defendants prevailed. The court recognized that, while Smith wrote the published version of FYH, he used Dowlen’s initial draft as a foundation and benefited from her promotional and administrative efforts. The court awarded $6,000 for Dowlen’s contributions to FYH and $4,000 for purchases benefiting Atilis Gym, totaling $10,000.

The court explained:

“It would be unjust for Smith to retain the benefit of Dowlen's services and the items she purchased for Atilis without compensating Dowlen.”

Allocation of Presale Proceeds

The court declined to award the full presale proceeds to either party. Instead, it equitably allocated the $35,000 in escrow as follows:

• $10,000 to Defendants (Dowlen and Bodyworks) for unjust enrichment
• The remainder to Smith, who was “in the best position to refund payments to customers who did not receive a book” and to “provide books to those who had paid.”

The court rejected the argument that Trumbetti or Atilis were indispensable parties, noting that neither had asserted claims to the proceeds.

Other Claims

All other claims—including promissory estoppel, fraud, negligent misrepresentation, conversion, misappropriation of trade secrets, and restraint of trade—were rejected for lack of evidence, failure to meet legal requirements, or because the property at issue (the customer list and manuscript) was not solely the property of either party.

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Practical Implications for New Jersey Businesses

Oral Agreements and Ambiguity

This case is a cautionary tale about the risks of oral agreements, especially in ventures involving intellectual property, third-party funds, and joint promotion. The lack of written terms on financial controls, ownership, and dispute resolution left both sides exposed and limited their legal remedies.

Handling of Presale Funds

Where one party controls presale funds, the absence of express contractual terms about escrow, accounting, or permissible uses can lead to major disputes. Here, Dowlen’s use of funds for personal and unrelated expenses was not a breach because there was no agreement to segregate or restrict the funds.

Limits of Tort and Equitable Claims

Absent clear evidence of “bad faith,” “wrongful interference,” or “exclusive ownership,” courts are reluctant to impose tort liability or recognize trade secrets in collaborative ventures.

Unjust Enrichment as a Safety Net

Even when contract and tort claims fail, courts may grant recovery for unjust enrichment if one party has clearly benefited from another’s efforts or expenditures without compensation.

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Actionable Takeaways for Business Owners and Practitioners

1. Reduce Agreements to Writing: Always memorialize key terms in writing, including scope of work, financial arrangements, control of funds, and dispute resolution.
2. Specify Fund Handling: If managing presale or third-party funds, expressly agree on escrow, permissible uses, and accounting methods.
3. Clarify Intellectual Property Rights: Define in advance who owns drafts, customer lists, and final work product.
4. Document Contributions and Expenses: Maintain clear records of work performed and expenses incurred, especially in collaborative projects.
5. Understand Limits of Tort Claims: Recognize that mere dissatisfaction or breakdown in business relationships rarely meets the high legal bar for tortious interference or fraud.
6. Unjust Enrichment is No Substitute for Contract: While courts may award unjust enrichment damages, such recovery is limited and uncertain compared to contractual remedies.

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Conclusion: Seek Counsel Before You Collaborate

Smith v. Bodyworks Publishing LLC underscores the perils of informal business arrangements and the importance of written agreements in complex collaborations. If your business is considering or engaged in a joint venture, especially one involving shared revenues or intellectual property, consult experienced New Jersey business counsel to protect your rights and avoid costly, protracted litigation.