BBF, INC. v. Germanium Power Devices Corp.
13 Mass.App.Ct. 166, 1982 Mass. App. LEXIS 1188, 430 N.E.2d 1221 (1982)
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Rule of Law:
Corporate employees breach their fiduciary duty of loyalty when they use confidential information gained during their employment to personally pursue a business opportunity that their employer is actively considering. Actions that are ordinarily permissible, such as hiring at-will employees, may become wrongful when done in connection with and as part of this breach of loyalty.
Facts:
- BBF Group, Inc. (BBF) was in the business of manufacturing germanium transistors, with Francis B. Driscoll as general manager and John Q. Adams, Jr. as marketing manager.
- A competitor, Solitron Corporation, confidentially offered to sell its germanium operation, including assets and customer lists, to BBF.
- BBF assigned Driscoll to investigate the opportunity; Driscoll initially recommended the purchase but later advised further negotiation.
- BBF's chief executive decided to 'bide its time' for a more attractive offer, but BBF remained interested in the acquisition.
- While still employed by BBF, Driscoll and Adams, along with an attorney, Mr. Oliver Ward, secretly began planning to form their own company to acquire the Solitron assets.
- Driscoll and his associates made undisclosed visits to the Solitron plant to pursue the opportunity for themselves.
- When Solitron made a renewed offer to BBF, Driscoll was instructed by BBF to investigate but failed to do so, instead continuing to pursue the deal for his own venture.
- While still technically a BBF employee, Driscoll and his associates formed Germanium Power Devices Corporation and purchased a portion of Solitron's assets, and also recruited key technical employees from BBF to join their new company.
Procedural Posture:
- BBF Group, Inc. filed a complaint in the Superior Court against Germanium Power Devices Corporation, Driscoll, Adams, and Ward.
- The complaint alleged misappropriation of a corporate opportunity, breach of the duty of loyalty, and wrongfully inducing employees to leave BBF.
- The trial judge found for BBF and awarded damages of $6,004.93, representing the salaries paid to Driscoll and Adams during their period of disloyalty.
- BBF appealed to the appellate court, challenging the adequacy of the damages award.
- The defendants jointly filed a cross-appeal, challenging the finding of liability against them.
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Issue:
Do corporate employees breach their duty of loyalty when they use confidential information to personally pursue a business opportunity their employer is considering, and recruit fellow at-will employees for their new venture, even if the employer had temporarily decided to wait for a better offer on the opportunity?
Opinions:
Majority - Cutter, J.
Yes. Corporate employees breach their duty of loyalty by using confidential information to appropriate a corporate opportunity for themselves and by recruiting co-workers as part of that breach. The court reasoned that Driscoll and Adams owed a duty of loyalty to BBF and acted unfairly by using information acquired in confidence—specifically, the opportunity to acquire Solitron's assets—for their own advantage. The opportunity belonged to BBF because the company remained interested, even though it had decided to delay the purchase. The court also held that while hiring at-will employees is ordinarily permissible, the recruitment of BBF's employees was 'wrongful' in this context because it was an integral part of the defendants' 'conspiracy' to breach their duty of loyalty. However, the court affirmed the trial judge's limited damages award, finding that BBF had failed to prove with adequate certainty that the defendants' actions caused its lost profits or that the defendants were unjustly enriched beyond the salaries they received during their period of disloyalty.
Analysis:
This case solidifies the principle that a corporate opportunity exists as long as the corporation remains interested, even if it temporarily delays action. It demonstrates that the fiduciary duty of loyalty prevents employees from using confidential information to usurp such opportunities for themselves. The decision also illustrates how otherwise lawful conduct, like soliciting at-will employees, can become tortious when it is part of a larger breach of fiduciary duty. Critically, the case serves as a stark reminder that proving liability for a business tort is insufficient for a major recovery; a plaintiff must also prove damages with reasonable certainty, as courts will not award speculative damages for lost profits without a concrete evidentiary basis.
