$4.1 Million Award For Violating Fiduciary Duty
Employees who are in positions of trust and confidence and who attempt to sell their employers’ business for personal gain and disclose confidential information to competitors violate fiduciary duties owed employers.
N avigant, a consulting firm, sued two of its former employees, John Wilkinson and Sharon Taulman, for breach of fiduciary duties after they went to work for a competitor. Navigant alleged that the two solicited other employees to work for the competitor and disclosed confidential information to the competitor that enabled it to compete with the Navigant on advantageous terms.
While the two were employed by Navigant, they were approached by the competitor, which was interested in buying the consulting unit that the employees ran. Without telling Navigant, the two sent an offer to the competitor. They also sent confidential information about Navigant and its customers. Additionally, they negotiated a new lease on an office space on behalf of Navigant. During the course of negotiations with the competitor, the employees made an offer to Navigant to buy the consulting unit they ran. When this offer was rejected, the employees resigned and went to work for the competitor, taking their employees with them.
Affirming a federal jury award in Texas of more than $4.1 million to Navigant, the New Orleans-based U.S. Court of Appeals for the 5th Circuit ruled that Wilkinson and Taulman disclosed confidential information in their attempt to profit from the sale of a portion of Navigant’s business to a competitor. Although the 5th Circuit acknowledged that an employee who is preparing to compete with an employer lacks a fiduciary duty under most circumstances to disclose that intent, the court held that employees must not mislead the employer, and that if they do so, they may be liable for the former employer’s damages. Navigant Consulting Inc. v. Wilkinson, 5th Cir., No. 06-11071 (11/15/07).
Impact: Employees who are in positions of trust and confidence and who attempt to sell their employers’ business for personal gain and disclose confidential information to competitors violate fiduciary duties owed employers.
Workforce Management, December 10, 2007, p. 7 — Subscribe Now!