General Automotive Mfg. Co. v. Singer

Brief Fact Summary. Defendant, John Singer, engaged in business activity that directly competed with his employer, Plaintiff General Automotive Mfg. Co., and never notified Plaintiff of his activity.

Synopsis of Rule of Law. An employee will be held to his or her contractual duty of loyalty, and their fiduciary duty would forbid them from engaging in activities that are competitive with their employer.

Facts. Defendant was well-respected in the field of work that he was engaged. Plaintiff hired Defendant, offering salary plus a 3% commission. Defendant helped Plaintiff’s business grow, but Defendant reasoned that Plaintiff’s shop was unable to fill some orders that required different machinery or larger capacity. Defendant did not notify Plaintiff of these orders and instead filled these orders himself through other machine shops, keeping all the profits from this sideline business.

Issue. The issue is whether Defendant’s sideline business violated his fiduciary duty to automotive.

Held. Defendant did violate his fiduciary duty. Although Plaintiff may not have been able to fill the orders under the shop’s current capacity, Defendant owed a duty to Plaintiff to make Plaintiff aware of the orders. The Plaintiff could then decide whether they wanted to modify their shop to fill those orders. Defendant agreed to act solely for Plaintiff when he contracted with Plaintiff.

Discussion. There was a contract that specifically stated Defendant’s obligations, but there also is a general fiduciary duty that Defendant owed to Plaintiff by being a manager at the shop.