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Fiduciary Duties and Abuses of Trust
In KJA Consultants Inc. v. Soberman (2002), 17 C.C.E.L. (3d) 261 Soberman was a very important employee who basically ran the business for 14 years. He was the point man for virtually all the clients. To the public at large Soberman was KJA and he had fiduciary duties to his employer. Management made no plans for his departure and no one else in the company knew the internal workings of the plaintiff. The owner’s health prevented him from stepping in when Soberman quit and that left the company very vulnerable.
After Soberman quit, he sent a letter out to all KJA customers along with his brochure saying, “If I can be of assistance, please do not hesitate to call.”
At issue was whether Soberman, by virtue of having been such an important employee, was precluded from competing with his employer. Their contract did not contain a non competition clause, but KJA argued that in common law, Soberman was a “key Man” who owed fiduciary duties to his former employer which included a duty not to use knowledge he acquired by virtue of his position in order to take significant clients away.
The court found that Soberman’s direct solicitation of his former employer’s customers constituted a clear breach of his fiduciary duties and responsibility to KJA. The court based its decision on the fact that Soberman used his knowledge of KJA’s customers to target specific people within the customer organizations in order to get the business. That was a misuse of KJA’s confidential information.
The plaintiff succeeded in obtaining some injunctive relief against its former employee and obtained orders preventing him from doing further new work for his former employer’s clients. The court also ordered Soberman not to further solicit customers or use confidential information. However, the work already in process was permitted to be completed so as not to negatively impact on innocent third parties. The law suit continued with respect to the plaintiff’s attempts to disgorge profits.