Many relationships have been determined to include special obligations between one party, often with power or the ability to exercise discretion that impacts on the other party, who may be vulnerable. Such relationships are often considered to be fiduciary in nature. The types of relationships that may be considered fiduciary are not limited, but they generally all involve the hallmarks of trust and vulnerability referred to above. Examples include lawyer and client, trustee and beneficiary, director and company, power of attorney and beneficiary and sometimes accountant and client.
A determination that a relationship is fiduciary in nature can have far reaching impacts. A fiduciary owes significant duties to the other party. These duties include duties of loyalty, good faith and the general requirement to put the other person’s interests first. The failure to perform such duties can result in damages, special costs, and exceptional abilities to enforce.
An example of such a relationship can be found in the case of KJA Consultants Inc. v. Soberman (2002), 17 C.C.E.L. (3d) 261. In this case, 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 was determined to owe 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 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. The law suit continued to determine the plaintiff’s claims for an order that Soberman disgorge profits.
This case demonstrates but one example of a fairly typical breach of fiduciary duty case. Wagner Sidlofsky LLP and its lawyers have substantial experience dealing with breach of fiduciary duty cases in numerous contexts.
