At lunch the other day, a friend said that he was about to attend a conference call with a potential client in an industry in which his firm did not have any direct experience. However, he was going to include in the call another person who had lots of relevant experience and, if the call went well and they landed the client, hire the visiting expert to service that account. Sounded like a win-win situation.
What’s wrong with this picture?
The potential problem was whether the guest speaker was presently employed. If he worked for someone else in New York, and was about to take a business opportunity for himself that he arguably could garner for his present employer, he could be held liable for violating his obligation to abstain from competing with the employer — and the new employer might be liable for encouraging such conduct.
Generally, New York law provides that during the period of employment, an employee must refrain from (1) competing with the employer; (2) acting on behalf of third parties whose interests conflict with those of the employer; or (3) using or disclosing the employer’s confidential or trade secrets. Courts applying New York law have even denied motions to dismiss and allowed claims to go forward against a new employer for “aiding and abetting” a former employee’s breach of fiduciary duty. Not a win-win, after all.
Even when the employee does not have a non-compete or non-solicitation agreement, these obligations are enforceable under the common law. So, a former employer who finds out (perhaps, from an errant email sent or received on the company’s system) about the employee’s “moonlighting” and developing a lead for the employee’s benefit in a field in which the employer also provides goods or services could, theoretically, sue the employee and the new employer for such selfish indiscretion. See, e.g., Don Buchwald Associates v. Marber-Rich, 11 A.D.3d 277 (N.Y. App. Div. 2004); Design Strategies, Inc. v. Davis, No. 02 Civ. 5329 (VM), 2004 U.S. Dist LEXIS 11367 (S.D.N.Y. June 22, 2004) (allowing claim against new employer for aiding and abetting breach of fiduciary duty).
The good news (as it were) is that the special guest of my friend’s conference call was presently unemployed and did not have any restrictive covenants preventing him from soliciting former clients or competing. So, there was minimal danger of the employer chasing the employee and his new employer for an alleged breach of fiduciary duty (depending on whether the guest really did not have an enforceable non-compete agreement).
Moral of the story: don’t take away that business opportunity from your boss while you’re still working for that company. The boss might not only be heart-broken by such perceived treachery, but litigious as well.
[1] Lyrics by Peter Cetera of “Chicago”
