The Unloyal Employee - May End Up Owing a Tidy Sum

That's the lesson to be learned from the 5th Circuit's affirmation of a $3 million dollar jury verdict in a case where two employees were found guilty of breaching their fiduciary duty when they negotiated behind their employer's back to sell the portion of the business in which they were engaged. Navigant Consulting, Inc. v. Wilkinson (5th Cir. 11/15/07).

Interestingly even though the employees in question had non-competes, it was the broad Texas law on breach of a fiduciary obligation that was the basis for the recovery. The trial court had eliminated damages for misappropriation of trade secrets finding it duplicative of the breach of fiduciary claim.

One of the "bad acts" was negotiating and signing a 4 year lease and then using the lease as "leverage" against their employer in attempting to force a sale of the business to them. An additional "bad act" was that they had been negotiating with several buyers to sell the business that they were hoping to acquire.

Navigant Consulting is a good overview of the law in an area where I think we are going to see more litigation.