Taser International, Inc. v. Ward
582 Ariz. Adv. Rep. 23, 231 P.3d 921, 224 Ariz. 389 (2010)
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Rule of Law:
An at-will employee who has not signed a non-compete agreement may take preparatory steps to compete with their employer before their employment terminates. However, they breach their fiduciary duty of loyalty if their pre-termination actions cross the line from mere preparation into active competition, such as by engaging in substantial product development efforts for a rival enterprise.
Facts:
- Steve Ward was employed as the vice-president of marketing for Taser International, a company that develops and manufactures electronic control devices and accessories.
- Ward was an at-will employee and did not sign any employment contract, non-compete agreement, or non-disclosure agreement.
- While employed, Ward had access to Taser's confidential information and participated in high-level meetings regarding new product ideas and company strategy.
- In December 2006, while still employed at Taser, Ward began personally exploring the concept of an eyeglass-mounted camera, seeking legal advice and hiring patent counsel.
- Between April and July 2007, Ward shifted his focus to a clip-on camera device, communicating with a product development company (JAM-Proactive) about its design and receiving a product development proposal.
- Before his resignation, Ward completed substantial work on a business plan to develop, market, and sell his own clip-on camera device.
- Ward resigned from Taser on July 24, 2007, without ever disclosing his plans to develop a competing product or form a new business.
- On August 23, 2007, Ward formed Vievu LLC, which began marketing a clip-on camera device to consumers and law enforcement.
Procedural Posture:
- Taser International sued Steve Ward in the trial court for claims including breach of the duty of loyalty and breach of fiduciary duty.
- Taser moved for partial summary judgment on the liability aspect of the loyalty and fiduciary duty claims.
- Ward filed a cross-motion for summary judgment on the same claims.
- The trial court granted Taser's motion, finding as a matter of law that Ward had breached his duties, and denied Ward's cross-motion.
- Ward, as appellant, appealed the trial court's grant of summary judgment to the intermediate appellate court.
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Issue:
Does an at-will employee without a non-compete agreement breach their fiduciary duty of loyalty by taking steps to develop a competing product and business plan while still employed?
Opinions:
Majority - Portley, Judge.
No, an at-will employee without a non-compete agreement does not breach their fiduciary duty of loyalty, as a matter of law, merely by taking preparatory steps to compete post-employment; whether those actions cross into impermissible active competition is a fact-specific inquiry. An employee is free to make reasonable preparations to compete, such as developing a business plan or seeking legal advice. These actions are distinct from active competition, which is prohibited. The court found that Ward's creation of a business plan and consultation with attorneys were permissible preparatory steps. However, a genuine issue of material fact existed as to the extent of Ward's pre-termination design and development efforts with the product design firm, which could constitute direct competition. The court also rejected Taser's corporate opportunity theory, holding that a general, publicly known idea for a product is not a 'corporate opportunity' that can be usurped; doing so would create a de facto non-compete agreement. Finally, the court held that an employee has no general duty to disclose plans to compete after leaving employment.
Analysis:
This decision provides important guidance on the scope of an employee's duty of loyalty in the absence of a non-compete agreement. It reinforces the principle that employees are free to prepare for future competition but draws a critical, albeit fact-sensitive, line at active competition. By narrowly interpreting the corporate opportunity doctrine to exclude general ideas, the court protects employee mobility and prevents employers from claiming broad fields of business as their exclusive property. The ruling emphasizes that liability for breach of loyalty often turns on specific factual questions, such as the extent of product development undertaken before resignation, making summary judgment difficult in such cases.
