SW Legal Educational Publishing

Taking Data and Customers to New Employer from Old Employer is Breach of Fiduciary Duty
Description Appeals court upheld a finding of a securities arbitration panel awarding over $1.1 million to a securities firm that saw two former employees take its files and customers to another securities firm, while they were still employees. This was a breach of the duty of loyalty to their employer.
Topic Agency
Key Words Duty of Loyalty
C A S E   S U M M A R Y
Facts Everen Securities sued two former employees and their new employer, A.G. Edwards, for breach of contract, breach of fiduciary duty, and misappropriation of trade secrets when the employees left Everen, and went to Edwards, taking Everen's database in order to move clients to Edwards. Since the parties involved were registered securities brokers, the court ordered the claims submitted for binding arbitration to the NYSE. The arbitration panel ordered defendants to pay Everen over $1.1 million. Defendants appealed the award.
Decision Affirmed. Judicial review of arbitration is quite limited; the court confirms the arbitration panel's award. "Corporate officers owe a fiduciary duty of loyalty to their employer not to actively exploit their positions within the corporation for their own personal benefit or hinder the ability of a corporation to continue the business for which it was developed." The former employees' use of a customer database for Edwards, and actively soliciting customers for Edwards, while still working for Everen, showed a breach of fiduciary duty to the employer.
Citation Everen Securities, Inc. v. A.G. Edwards and Sons, Inc., 719 N.E.2d 312 (App. Ct., Ill., 1999)

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