The Client

In a precedent-setting case, we represented an employee who had been sued by his former employer under the “faithless servant” doctrine for allegedly diverting a corporate opportunity to his new employer.

The Trial

We handled the case from beginning to end, including years of discovery, trial and an appeal in the United States Court of Appeals for the Second Circuit. We substantially prevailed, after a two-week bench trial before Southern District of New York Judge Marrero, which generated no less than five decisions before the case reached the Second Circuit.

The Appeal

The Second Circuit affirmed the District Court’s determination that, even where there is a finding of disloyalty by an employee, the wages subject to forfeiture are limited to the employee’s base compensation received during the period of actual disloyalty, but that commission income unrelated to the alleged disloyalty was not subject to forfeiture.

The Second Circuit also upheld the District Court’s ruling, which granted a motion in limine, to preclude evidence of lost profits, and thus to strike the plaintiff’s jury demand, due to the plaintiff’s failure to produce evidence in discovery of its lost profits and other “legal” damages. In this case, the Second Circuit also adopted the rule that it is not necessary to prove "bad faith" in order to obtain sanctions for a party’s failure to provide discovery.

The Result

On a practical note, the Second Circuit made a point of stating what may have been obvious: that actions associated with looking for a new job – even by interviewing during work hours, and using a cell phone and car provided by one’s employer – “are not the kind of actions the ‘disloyal servant’ doctrine was meant to deter.”

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