Fiduciary obligations of agents Duties during and after termination of agency (grabbing and leaving)

p83 Town & Country House & Home Service, Inc. v. Newbery
3 N.Y.2d 554, 147 N.E.2d 724, 170 N.Y.S.2d 328, 1958 N.Y. Brief Fact Summary. Defendants, Percy Newbery et al., are former employees of Plaintiff, Town & Country House & Home Service, Inc. Plaintiff brought an action after Defendants started their own competing company targeting Plaintiffs customers. Synopsis of Rule of Law. An employee can owe a fiduciary duty to their employer for the employers trade secrets after their service has been terminated. Facts. Plaintiff operated a home cleaning business. The husband and wife who ran Defendant company started the business by making several hundred calls and screening entire neighborhoods that were likely candidates for their services. After time, the list grew to over 200 customers. Defendants worked for Plaintiff, but they eventually quit and worked third shift at another company. Defendants decided they would begin their own home-cleaning company, and they solicited Plaintiffs customers for their own business. Some customers decided to switch from Plaintiffs company to their company. Plaintiff sought damages for the lost profits, and wanted Defendants cease their operations, claiming they compromised his trade secrets. Issue. The issue is whether Defendant is liable for damages for work performed after their employment ended. Held. Defendants owe Plaintiff the profits they made from customers taken from Plaintiff, but they do not have to cease their operations. Defendants had a duty to protect Plaintiffs trade secrets and are prohibited from profiting from the secrets even after their employment ended. The customer listing was formulated through many much effort on behalf of Plaintiffs, but their methods of cleaning a house were nothing so secretive as to justify prohibiting Defendants from continuing their cleaning services. Discussion. Most people are at will employees wherein either side can terminate the employment at any time. However, public policy would dictate that an employee should be able to continue in the field of work while not having a right to exploit information that was held in confidence at their prior employment.

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Fiduciary obligations of agents Duties during and after termination of agency (grabbing and leaving)

Town & Country House & Home Service, Inc. (T&C) (plaintiff) was a house cleaning business run by Mr. Rossmore. Mrs. Rossmore, wife of T&Cs president, built the companys customer base by randomly calling residents in a certain section of town that she determined might contain likely prospects. Selling T&Cs service was very difficult. Mrs. Rossmore typically made hundreds of calls to gain a small number of prospects. After interested prospects were contacted, Mrs. Rossmore would make appointments to visit them personally to close the sales and determine the prices they would be charged. Newbery and some associates (Newbery et al.) (defendants) worked for T&C for nearly three years. After terminating their employment with T&C, Newbery et al. formed their own house cleaning company which directly competed with their former employer. Newbery et al. built their customer base by soliciting T&Cs customers. After discovering that Newbery et al. solicited its customers, T&C sued Newbery et al., alleging that Newbery et al. had engaged in unfair competition. In its complaint, T&C contended that its business was unique, personal and confidential and that Newbery et al. breached their confidential relationship with T&C by appropriating its trade secrets, i.e., T&Cs customer information, for competitive purposes. The trial court dismissed T&Cs complaint, holding that there was nothing secret or confidential about T&Cs business, and that T&C did not represent to Newbery et al. that its customer information was confidential. The appellate division reversed the trial courts decision, finding that Newbery et al., while working for T&C, conspired to quit T&C, form their own business and appropriate T&Cs customers for their own gain. The Appellate Division held that Newbery & Assoc.s actions constituted a violation of the fiduciary obligations they owed to T&C as employees, and thus T&C was entitled to relief.