Pollack v. Berlin-Wheeler, Inc. (Missouri 2003) [Duty of Loyalty/Disgorgement]
§ Pollock and Berlin-Wheeler entered into a contract where Pollock, who ran an executive recruiting business, was to be the employee of Berlin-Wheeler, who ran an employment agency.
§ Pollock was to devote fulltime to Berlin and be paid a salary plus a percentage of commissions she generated
§ Pollock was terminated over her failure to report commissions generated, and she filed this suit to collect other commissions she claimed were hers under the employment contract.
§ Specifically, she converted to her own use a commissions check after placing someone into a job after she started working for Berlin. She did, however, try to place this person in a job prior to starting work for Berlin. Once she started working for Berlin, she used his fax machine to send over the client’s resume (which eventually got the client the job).
§ Whether Berlin-Wheeler had a superior property interest in the check.
§ Pollock earned the check while competing against her employer.
· Hence Pollock’s ownership vel non of the check is unimportant (court found not enough evidence that Berlin had “ownership” of check)
§ The court’s judgment regarding the check is warranted by Pollock’s BREACH of her DUTY OF LOYALTY
· Whether liability was predicated on conversion or breach of fiduciary duty, Berlin was entitled to the entire amount of the check.
§ An agent who competes with his principal must disgorge any benefits resulting from the competition, unless the parties ratify the competition or waive or qualify the prohibition.
§ Pollock, as Berlin’s agent, had a duty not to compete with her employer during her employment.
· “Unless otherwise agreed, an agent is subject to a duty not to compete with the principal concerning the subject matter of his agency.” Restatement (Second) of Agency § 393.
§ Note: You can contract over Fiduciary Duty to some extent
o Note (not needed for holding)
§ The breach of fiduciary duty can rise to the level of a MATERIAL BREACH of CONTRACT
· Note on Non-Compete Clauses (post-employment)
o Generally you can compete after you leave
o However, you can put a non-compete clause in an employment contract
§ Generally, at a minimum, has to have a valid purpose
§ Some states take a hard line against post-employment clauses (California)
· Note on Post-Employment Generally
o Fiduciary duty ends, but still can’t take trade secrets (for example)