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Court Backs Employer on Confidentiality Breach

Posted on February 21, 2023

A local electrical company’s claims against a former company manager for violation of a confidentiality agreement were upheld by a Massachusetts Superior Court after the manager downloaded a cache of proprietary information from the company’s server and went to work for a competitor.

The company’s claims included:

  • Breach of contract and the implied covenant of good faith and fair dealing
  • Intentional interference with advantageous business relations
  • Breach of fiduciary duty, and
  • Misappropriation of trade secrets in violation of M.G.L. c. 93A (the Massachusetts consumer protection statute).

The court denied the employee’s motion to dismiss all four of the claims.  It first accepted a concession from the employee’s attorney that the first count of breach of contract was sufficient to survive a motion to dismiss.

The employee had signed a Non-Disclosure/Non-Solicitation/Non-Piracy Agreement with the company that among other restrictions, prohibited him from retaining or using confidential information of the company.  Confidential information is broadly defined in the agreement to include customer and account information and records related to operations, marketing, sales, and pricing of the company.

A forensic analysis of the manager’s activities after he gave notice to the company showed that he had emailed to himself a folder containing a great deal of confidential information. He then deleted the folder.

The second count of intentional interference with advantageous business relations was based on a particular contract.  The employer had submitted a bid on a contract that the manager later secured for his new employer.  The court found that these facts were sufficient to support the claim.

The third count of breach of fiduciary duty was also supported by the facts.  High-level employees, those “occupying a position of trust and confidence,” are held to a higher standard of loyalty to their employer. The manager’s retention and use of the confidential information would constitute a breach of his fiduciary duty.

The court acknowledged that disputes between an employer and employee usually fall outside the context of trade or business within the meaning of chapter 93A.  However, the facts pleaded, in this case, support the company’s claim that the manager had misappropriated trade secrets, and the court rejected dismissal of the claim.

This case illustrates the range of legal strategies available to an employer who believes an employee has wrongly taken and used its confidential information in a new position with a competitor.  The weight given to the non-disclosure agreement is significant, but the claims brought under non-contractual legal theories also survived this early stage of litigation.

AIM members with questions about confidentiality agreements or any other human resource matters may contact the AIM Employer Hotline at 800-470-6277.