Citation. Gibbs v. Breed, Abbott & Morgan, 271 A.D.2d 180, 710 N.Y.S.2d 578, 2000)
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Brief Fact Summary.
Charles Gibbs and Robert Sheehan, (Plaintiffs), former partners of Breed, Abbot & Morgan, (Defendant), brought suit against Defendant for monies due to them under their employment contract. Defendant alleged Plaintiffs breached their fiduciary duty to Defendant. Plaintiffs appeal the trial court judgment in favor of Defendant in the amount of $1,861,045.
Synopsis of Rule of Law.
It is a breach of fiduciary duty for a shareholder to surreptitiously provide competitors with a selective list of qualified employees and their salaries.
Facts.
Between January and July of 1991, Plaintiffs were the only partners in Defendant’s Trusts and Estates Department. The department also consisted of three associates and support staff. In June, Plaintiffs informed Defendant’s president that they had accepted offers to join Chadbourne. Days later, Plaintiffs sent Chadbourne a memo detailing the names of staff in the Trusts and Estate Department and corresponding personnel information such as salaries, billable hours, and bonus structures. The memo was prepared in April in anticipation of discussions with prospective firms. Plaintiffs testified that the recruitment of certain personnel was discussed with different firms between March and May.
While plaintiffs were still working at Defendant law firm, Chadbourne interviewed several members of Defendant’s staff. When Plaintiffs left Defendant law firm, they took with them their chronologies. In the following weeks, Chadbourne made employment offers to Defendant’s staff, all of whom accepted. Plaintiffs also used their chronologies to solicit Defendant’s clients. 92 of the 201 Trusts and Estate clients transferred their business to Chadbourne.
Plaintiffs then brought suit to recover monies due to them under their employment contract with Defendant. Defendant alleged Plaintiffs breached their fiduciary duty to Defendant. The trial court held that the way in which the leave was orchestrated was done with the intention to cripple Defendant’s Trusts and Estates department, specifically, 1) Plaintiffs breached their fiduciary duty by supplying confidential employment information to Chadbourne while still partners at Defendant law firm; 2) Plaintiffs breached their fiduciary duties by taking their chronologies with them; 3) Gibbs breached his fiduciary duty by persuading Sheehan to leave with him.
Issue.
Whether Plaintiffs breached their fiduciary duty as partners of the firm they were about to leave by supplying confidential information to Chadbourne while still partners at Defendant law firm.
Whether Gibbs improperly solicited his partner Sheehan to leave the law firm.
Whether it was improper for the two attorneys to take their chronologies with them.
Held.
Yes. Plaintiffs breached their fiduciary duty as partners of the firm they were about to leave by supplying confidential information to Chadbourne while still partners at Defendant law firm.
No. There was no breach of fiduciary duty with respect to Gibbs’ interactions with Sheehan.
No. There was no breach of fiduciary duty with respect to either partner’s removal of his desk files from Defendant law firm.
Dissent.
The evidence before the court fails to support any finding that Plaintiffs violated their fiduciary duty to their partners at Defendant law firm. There is no showing nor did the trial court find that the employee information was provided to Chadbourne or any other firm during the period that Plaintiffs were interviewing or at any time before they gave notice to Defendant law firm. Further the type of employment information at issue in this case is generally widely known outside the firms themselves and can be obtained from professional publications, headhunters, and other sources.
Discussion.
Defendant did not establish that Gibbs breached any duty to it by discussing with Sheehan a joint move to another firm. There was no breach of duty by Plaintiffs in taking their desk files. However, there is ample support for the finding that the preparation and sending of the memo was a breach of fiduciary duty. Plaintiffs began recruiting while still members of the firm and prior to serving notice of their intent to withdraw. The memo itself contained confidential employment data calculated to give Chadbourne an unfair advantage in recruiting certain employees. Gibbs was privy to this information based on his position as a shareholder.
