1. The court rejects the plaintiffs' argument that Greenspan breached his duty of loyalty by disclosing Isotronics' annual sales figures to Scherer. The court rules that general information about a company's sales level would not be considered a protected trade secret.
2. The court upholds the trial judge's finding that Greenspan breached his duty of loyalty by secretly soliciting key Isotronics managers to join Aegis while still employed at Isotronics.
3. The court rejects some of the trial judge's other bases for finding liability, including claims against other employees and allegations of intent to cripple Isotronics.
1. The court rejects the plaintiffs' argument that Greenspan breached his duty of loyalty by disclosing Isotronics' annual sales figures to Scherer. The court rules that general information about a company's sales level would not be considered a protected trade secret.
2. The court upholds the trial judge's finding that Greenspan breached his duty of loyalty by secretly soliciting key Isotronics managers to join Aegis while still employed at Isotronics.
3. The court rejects some of the trial judge's other bases for finding liability, including claims against other employees and allegations of intent to cripple Isotronics.
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1. The court rejects the plaintiffs' argument that Greenspan breached his duty of loyalty by disclosing Isotronics' annual sales figures to Scherer. The court rules that general information about a company's sales level would not be considered a protected trade secret.
2. The court upholds the trial judge's finding that Greenspan breached his duty of loyalty by secretly soliciting key Isotronics managers to join Aegis while still employed at Isotronics.
3. The court rejects some of the trial judge's other bases for finding liability, including claims against other employees and allegations of intent to cripple Isotronics.
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Supreme Judicial Court of industry. Greenspan was not happy at
Massachusetts,Bristol. Isotronics. In 1983, he had explored the AUGAT, INC., et al.FN1 possibility of forming his own company, but had been unable to obtain financing. At that FN1. Isotronics, Inc. time, Greenspan had discussed his plan with v. four Isotronics employees who held AEGIS, INC., et al.FN2 important senior managerial positions. Greenspan told Scherer that these senior FN2. Jeremy D. Scherer. managers had been interested in Greenspan's Argued Oct. 1, 1990. 1983 plan. In May or June, 1984, Greenspan Decided Jan. 16, 1991. and Scherer approached these four men, and over the next several months had meetings with them, separately and collectively, and Before LIACOS, C.J., and WILKINS, on occasion also with prospective investors ABRAMS, NOLAN and O'CONNOR, JJ. in Aegis. Three of these four men subsequently left Isotronics and went WILKINS, Justice. directly to work for Aegis. One major The plaintiff Isotronics, Inc. (Isotronics), a ground for the plaintiffs' claims against the subsidiary of the plaintiff Augat, Inc. defendants is that, in secretly seeking to (Augat), manufactures high reliability metal obtain the services of key Isotronics microcircuit packages used to house managers, they knowingly joined in electronic circuits. The individual defendant Greenspan's breach of his duty to Isotronics. (Scherer) was one of three stockholders who That breach, the plaintiffs assert, in time led sold Isotronics to Augat in 1975. He to a disruption of Isotronics when all those continued to work for Isotronics until 1980, managers left Isotronics within a period of served next as an Augat vice president, and approximately two months. then acted as a consultant to Augat until April, 1983. In May, 1984, one month after In the summer of 1984, Scherer devoted his his agreement not to compete with Isotronics efforts to obtaining financing for Aegis. expired, Scherer formed the defendant Greenspan and three of the managers who Aegis, Inc., intending to manufacture high had been on Greenspan's prospective list in reliability metal and ceramic microcircuit 1983 were committed to work for Aegis, if packages. Aegis could be funded. The existence of the prospective management team was the most Scherer then communicated with Jay important factor in the view of the venture Greenspan, who was vice president and capitalists. Scherer prepared a detailed general manager of Isotronics, offering him business plan, describing Aegis's purposes; employment and an equity interest in Aegis. its potential competitors; the size and Greenspan, an able and energetic manager, condition of the packaging market, including held a position of trust and confidence in the fact that Isotronics controlled about two- Isotronics and was primarily responsible for thirds of that market; and, without naming Isotronics's success in becoming the the others, the experience and background of Aegis's anticipated management team. The of fact and rulings of law. After a Justice of other major ground for the plaintiffs' claims the Appeals Court, in October, 1989, in this case is that, in breach of his duty to allowed the defendants to take an maintain the confidentiality of Isotronics's interlocutory appeal, the judge filed gross sales figures, Greenspan disclosed amended and supplemental findings of fact precise figures to Scherer who was then able and rulings of law. We transferred the to include in his business plan information defendants' interlocutory appeal here on our about the current size of the metal packaging own motion. market, information that Scherer would not otherwise have had and without which, it is The trial judge ruled in the plaintiffs' favor claimed, venture capitalists would not have on only a portion of their theories of invested in Aegis. liability. He found for the defendants on the claim that various employees who went to Scherer sent his business plan to potential Aegis had entered into noncompetition investors late in July, 1984. Greenspan agreements with Isotronics. He found no delivered a letter of resignation on August 1, appropriation of Isotronics's trade secrets, no 1984, not stating any specific date for his solicitation by Aegis of customers while departure. He made no mention then, or at Greenspan worked for Isotronics, and no any other time, of the possible departure of misappropriation of customer lists. those key managers with whom he and Scherer had been talking or of other The judge concluded, however, that the Isotronics personnel with whom Greenspan defendants were liable for Greenspan's had been talking about joining Aegis. The breach of his duty of loyalty to Isotronics in prospective management team of Aegis met disclosing confidential information to early in September and agreed on their Scherer about Isotronics's level of annual relative shares of ownership of Aegis stock. sales. We disagree with this ruling because Greenspan left Isotronics on September 27. information concerning Isotronics's general On October 9, Aegis received a commitment level of sales was not confidential and no letter for an investment of $4,300,000. The specific information concerning that level of transaction was concluded on November 6. sales was required by prospective venture Aegis then entered the metal packaging capitalists. The judge also ruled that business, not producing its first packages Greenspan violated his duty of loyalty when, until May, 1985. while still an Isotronics employee, he secretly solicited key managerial employees Augat and Isotronics brought this action in to join Aegis once it was funded. We uphold April, 1985, advancing various claims this ruling. He also ruled that other former against the defendants. After extensive Isotronics employees had violated their duty discovery and other pretrial activity and the to Isotronics, a point we reject. Additionally, bifurcation for trial of the liability and the judge found liability because of damages portions of the case, the matter was misrepresentations made to Isotronics and tried in June and July, 1988, before a judge Augat and an intent of Greenspan and without a jury, during twenty-four trial days. Scherer to cripple Isotronics. We reject these In August, 1989, the judge filed his findings theories as independent bases of liability. information would not be a “trade secret” of 1. We reject the plaintiffs' theory of liability the traditional kind. See Jet Spray Cooler, based on the fact that, as the judge found, Inc. v. Crampton, 361 Mass. 835, 839-840, Greenspan, while an employee of Isotronics, 282 N.E.2d 921 (1972); New England disclosed confidential information to Overall Co., Inc. v. Woltmann, supra 343 Scherer concerning the precise level of Mass. at 75, 176 N.E.2d 193. We shall Isotronics's sales of metal packaging. The assume that, in particular circumstances, the argument is that, armed with Isotronics's amount of Isotronics's gross annual sales of sales figures, Scherer was able to provide metal packages could be protectible, information to venture capitalists without confidential information, and, if so, an which they would not have invested employee would have a duty not to disclose $4,300,000 in Aegis. Scherer did not that information. disclose precise sales figures to potential investors, but he did state in a business plan In determining confidentiality, several sent to potential investors, late in July, 1984, factors are relevant, including “the extent to that Isotronics's annual sales were between which the information is known outside of $30,0000,000 and $32,000,000. the business”; “the extent of measures taken by the employer to guard the secrecy of the Potential investors would be interested, of information”; and “the ease or difficulty course, in the approximate size of the market with which the information could be in which they would be investing their properly acquired ... by others.” Jet Spray funds. We accept the conclusion, inherent in Cooler, Inc. v. Crampton, supra 361 Mass. at the judge's findings, that the people who 840, 282 N.E.2d 921. By these tests, the invested in Aegis would not have done so plaintiffs' claim that the dollar volume of without that information. Isotronics's sales was entitled to protection as confidential information fails. Isotronics held about two-thirds of the metal packaging market in 1984, a fact that was Isotronics did not consistently and diligently known to people knowledgeable about the treat the level of its annual sales as a industry, in part because Isotronics did not confidential corporate fact. Its keep that fact confidential. This information acknowledgement and the acknowledgement suggests that the approximate volume of of people interested in the industry that sales in the entire industry was known by Isotronics had about two-thirds of the sales people who knew the industry. in the industry suggest strongly that the total annual sales of the industry were known in Although general business information and approximation by Isotronics and others. If routine data of a particular company the approximate volume of sales by normally is not protectible as confidential Isotronics's competitors was generally (New England Overall Co., Inc. v. known, as had to be the case for Isotronics Woltmann, 343 Mass. 69, 77, 176 N.E.2d to determine its market share, Isotronics's 193 [1961] ), the gross sales of a corporation disclosure of its market share in effect might properly be protectible as confidential disclosed its approximate annual sales in particular circumstances, although that volume. Moreover, the chairman of the board of directors of the plaintiff Augat met invested funds in Aegis did not require or regularly with securities analysts who receive precise sales figures. They obtained covered Augat and in effect provided them only approximations, in circumstances not with estimates of the annual sales of involving the disclosure of legally protected Isotronics. It was in Augat's interests, as two confidential information. Moreover, as a of its officers testified, that investment matter of law, the plaintiffs have failed to analysts have such information because a show that, but for Greenspan's disclosure of departure of corporate performance from the precise sales figures to Scherer, the expectations of investors could have an financing of Aegis would not have been adverse effect on the value of Augat's stock. possible. In guiding securities analysts toward the approximate level of Isotronics's annual 2. We agree with the plaintiffs that the sales, the plaintiffs obviously did not “guard defendants are liable for Greenspan's breach the secrecy of the information” and equally of his duty of loyalty to Isotronics in not obviously made the information “known protecting Isotronics's interests against the outside of the business” (i.e. outside of loss of key employees to Aegis. Greenspan, Augat and Isotronics). Jet Spray Cooler, Inc. as a vice president and general manager of v. Crampton, supra. Isotronics from 1981 to September 27, 1984, ran all aspects of Isotronics under the In addition to disclosures by the plaintiffs general supervision of the president of that destroyed any confidentiality of Augat, who was also the president of Isotronics's annual sales figures, there was Isotronics. Greenspan was responsible for evidence that several analysts were able to staffing and for hiring necessary arrive at approximations of Isotronics's replacements for any employees who might annual sales volume from a study of leave Isotronics. He regarded his duties to generally available information. The judge include maintaining at least one “backup” made no findings on this evidence, perhaps employee for each managerial position. because he concluded that the plaintiffs' unwillingness to disclose actual figures, as While Greenspan was still general manager opposed to facilitating estimates, preserved of Isotronics he and Scherer solicited several the confidentiality of Isotronics's sales important Isotronics employees to join Aegis information. Because we conclude that the if and when it were to be financed. Among plaintiffs' own conduct belied the those solicited, who later left Isotronics and confidentiality of Isotronics's annual sales went directly to work at Aegis, were: the figures, we need not consider whether this vice president for marketing and sales, who unchallenged evidence that sales left Isotronics on November 11, 1984; the information was readily and independently new product design manager, Isotronics's discoverable provides an independent most experienced engineer in the technology ground for denying confidentiality to of making metal packages, who left on Isotronics's sales figures. November 30, 1984; the manufacturing manager for Isotronics, who left on January The important point here is that, to make an 7, 1985; and Isotronics's engineering investment decision, the people who manager, who left on January 4, 1985. a non-competition agreement. See All Scherer and Aegis make no serious Stainless, Inc. v. Colby, 364 Mass. 773, 778, argument that they are not liable if they 308 N.E.2d 481 (1974); Spring Steels, Inc. participated with Greenspan (or any other v. Molloy, 400 Pa. 354, 362-364, 162 A.2d Isotronics employee) in a violation of his 370 (1960). The plaintiffs did not do so in duty of loyalty to Isotronics. See Barden this case. Cream & Milk Co. v. Mooney, 305 Mass. 545, 547, 26 N.E.2d 324 (1940) (liability for There are, however, certain limitations on joining in employees' wrongful conduct); the conduct of an employee who plans to BBF, Inc. v. Germanium Power Devices compete with his employer. He may not Corp., 13 Mass.App.Ct. 166, 173, 430 appropriate his employer's trade secrets. See N.E.2d 1221 (1982) (same). We reject the Eastern Marble Products Corp. v. Roman defendants' suggestion that, because an Marble, Inc., 372 Mass. 835, 838-842, 364 Isotronics employee could not be liable to N.E.2d 799 (1977). He may not solicit his Isotronics under G.L. c. 93A (see Manning employer's customers while still working for v. Zuckerman, 388 Mass. 8, 12-15, 444 his employer (see Chelsea Indus., Inc. v. N.E.2d 1262 [1983] ), they also may not be Gaffney, supra 389 Mass. at 11-12, 449 liable under G.L. c. 93A. See Peggy Lawton N.E.2d 320 [as to executive employees] ), Kitchens, Inc. v. Hogan, 18 Mass.App.Ct. and he may not carry away certain 937, 940, 466 N.E.2d 138 (1984). information, such as lists of customers (New England Overall Co., Inc. v. Woltmann, 343 It is important to define the limited basis for Mass. 69, 77, 176 N.E.2d 193 [1961] ). Of liability we recognize in this case. An at-will course, such a person may not act for his employee may properly plan to go into future interests at the expense of his competition with his employer and may take employer by using the employer's funds or active steps to do so while still employed. employees for personal gain or by a course See Meehan v. Shaughnessy, 404 Mass. 419, of conduct designed to hurt the employer. 435, 535 N.E.2d 1255 (1989); Chelsea Indus., Inc. v. Gaffney, 389 Mass. 1, 10, 449 The special circumstance of this case, N.E.2d 320 (1983). Such an employee has distinguishing it from the typical case of no general duty to disclose his plans to his improper employee conduct leading to employer, and generally he may secretly join competition with a former employer, is that other employees in the endeavor without there is but one significant breach of duty. It violating any duty to his employer. Id. at 12 is important but substantially isolated. The n. 20, 449 N.E.2d 320. The general policy defendants did not knowingly participate in considerations are that at-will employees any breach of duty by an Isotronics should be allowed to change employers employee in any respect except in joining freely and competition should be with Greenspan in soliciting the future encouraged. See Maryland Metals, Inc. v. employment of important employees. None Metzner, 282 Md. 31, 47-48, 382 A.2d 564 of the other wrongs we have listed above is (1978). If an employer wishes to restrict the a significant factor in this case.FN3 The post-employment competitive activities of a employees other than Greenspan committed key employee, it may seek that goal through no breach of duty. There is no showing that the key employees who left Isotronics for 921 (1966) (company president's liability Aegis joined together to destroy Isotronics. based, in part, on soliciting plaintiff's If Scherer and Aegis had solicited the employees to work for competitor); employees of Isotronics without the Lowndes Prods., Inc. v. Brower, 259 S.C. involvement of Greenspan prior to his 322, 335, 191 S.E.2d 761 (1972) (plant departure from Isotronics, there would be no manager who, while still employed by liability here. plaintiff, secretly hired key employees away, disrupting plaintiff's operations, violated FN3. The judge made findings on a duty of loyalty); Restatement (Second) of few other matters that might have Agency § 393 comment e, especially been or were breaches of duty, illustration 1 (1958).FN4 But see involving (it seems) minor harm to Headquarters Buick-Nissan, Inc. v. Michael Isotronics. The plaintiffs made no Oldsmobile, 149 A.D.2d 302, 303, 539 point of them in their brief. N.Y.S.2d 355 (N.Y.1989) (director of leasing not in breach of duty of loyalty in The principle that, before he terminates his successfully soliciting at-will leasing employment, a top managerial employee managers to join him in resigning and going may not solicit the departure of employees to work for defendant corporation), and to work for a competitor has been applied in Spring Steels, Inc. v. Molloy, 400 Pa. 354, various situations. The rule is most clearly 362-363, 162 A.2d 370 (1960) (vice applicable if the supervisor-manager, as a president of company who leaves with corporate pied piper, leads all his employer's certain key employees at-will, not liable), employees away, thus destroying the cases in which it was not claimed that the employer's entire business. See Barden departing executive was a general manager Cream & Milk Co. v. Mooney, supra 305 or chief executive who had a duty to Mass. at 546, 26 N.E.2d 324 (managers' maintain the plaintiff's managerial group. solicitation of all employer's drivers, at-will See generally on a corporate manager's employees, to join competitor breach of duty in hiring away at-will simultaneously is a breach of duty). employees, Annot., 24 A.L.R.3d 821, 841- Although Greenspan's solicitation was 846 (1969). The rule we express for the directed only at certain key managerial purposes of this case applies only to a personnel, his duty to maintain at least general manager who, while still employed, adequate managerial personnel forbade him, secretly solicits key managerial employees while still general manager of Isotronics, to leave their employment to join the general from seeking to draw key managers away to manager in a competitive enterprise. a competitor. See American Republic Ins. Greenspan admitted that he put his loyalties Co. v. Union Fidelity Life Ins. Co., 470 F.2d to the people who were to go to Aegis ahead 820, 824 (9th Cir.1972) (area manager's of his obligations as an officer of Isotronics. solicitation of insurance salesmen to join him in leaving plaintiff's employment to join FN4. Illustration 1 states: “A is competitor violated duty of loyalty); employed by P as manager for a Bancroft-Whitney Co. v. Glen, 64 Cal.2d year. Before the end of the year, A 327, 347-348, 49 Cal.Rptr. 825, 411 P.2d decides to go into business for himself; in anticipation of this and was not a breach of duty, nor are the without P's knowledge, he contracts defendants liable for any adverse with the best of P's employees to consequences of his departure. The work for him at the end of the year. plaintiffs were given ample notice At the end of the year, A engages in a that Greenspan would be leaving and competing business and employs the replaced him promptly on October 1, persons with whom he has 1984. The defendants are not liable, previously contracted. A has of course, for any adverse effects of committed a breach of his duty of any deficiencies of Greenspan's loyalty to P.” successors.
This illustration is close to the The plaintiffs' damages relate to negative
circumstances of the case before us effects on operating results that would not but not identical. None of the have occurred but for the departure of the Isotronics employees who left to key managerial employees. Because there is work for Aegis entered into a no finding or showing that Aegis would not contract to do so while at have been financed if these key employees Isotronics. Also, not every one of were not to work for it,FN6 and Aegis did not Isotronics's best employees joined sell any products until well into 1985, the the exodus to Aegis. Here we have plaintiffs' damages are not to be measured understandings, but no firm by Aegis's profits. The plaintiffs must prove commitments, by key production that losses that Isotronics sustained would and sales managers. not have occurred but for Greenspan's breach of his duty of loyalty. These would The defendants argue that the plaintiffs be losses that were caused by problems failed to show that their wrongdoing caused arising from the departure to Aegis of key any loss to the plaintiffs. In the liability managerial employeeswho were approached portion of a bifurcated trial, the plaintiff by Greenspan while he and they were still must show that the defendant's breach of employed by Isotronics, provided that the duty caused some harm for which the law losses were caused by events occurring provides redress because there can be no before Isotronics reasonably should have liability in the absence of causation. The replaced the departed managerial employees judge's findings on causation are sparse and, with competent people. See BBF, Inc. v. of course, are not focused on the Germanium Power Devices Corp., 13 consequences of the breach of duty that we Mass.App.Ct. 166, 173, 430 N.E.2d 1221 have identified in this opinion. We have (1982). considered the evidence and conclude that the plaintiffs have shown that the departure FN6. The financing was made of the key employees whom Greenspan available without any assurance that solicited caused some disruption of the key employees of Isotronics, who Isotronics.FN5 were disclosed to the investors, would join Aegis. Indeed, one of FN5. Greenspan's departure itself those people did not immediately go from Isotronics to Aegis. deliberately misrepresented his plans to reenter the packaging business to the 3. We consider next other bases on which president of Augat and to the chairman of the judge concluded that the defendants the board of Augat, leading them to think were liable. We disagree with the judge's that he was planning to enter the ceramics, conclusions that Greenspan and Scherer rather than the metal, packaging business. made actionable misrepresentations to Scherer had no duty to tell Augat what his Isotronics and that the evidence provides an plans were, nor did he have any duty not to independent ground for liability based on the mislead them. The evidence on which the theory that Greenspan and Scherer intended judge's findings are based discloses no to destroy Isotronics. There is another material misrepresentations on which Augat relatively minor issue on which we agree reasonably could have relied. Scherer had with the judge that liability might be revealed that he might be a prospective imposed on the defendant Aegis. competitor of Augat and Isotronics. His comments and the circumstances, including a. On August 1, 1984, Greenspan submitted Greenspan's disclosure to Augat that he a letter of resignation to the president of might join Scherer, should have put Augat Augat, sending a copy to the chairman of and Isotronics on guard rather than at ease. Augat's board of directors. In that letter, Greenspan stated, “I do not presently have c. We reject, as an independent basis for any other employment plans, and therefore liability, the judge's conclusion that the can stay for a period of time.” The judge defendants intended to cripple Isotronics in found that this was an affirmative order to ease Aegis's entry into the market. misrepresentation. The statement is patently We have already identified the ambiguous. It is correct in that, Aegis not yet circumstances under which the defendants having been funded, Greenspan had no are liable for Greenspan's breach of duty.FN7 assurance of employment by Aegis. He did, There is no other significant respect in however, intend to join Aegis, if it were to which the defendants may be held liable. be funded, under terms that had been They had an absolute right to compete with established. The statement that he could stay Isotronics. The possibility of crippling, or for a period of time points accurately toward even destroying, a competitor is inherent in the absence of any immediate plan to work a competitive market. The defendants' state elsewhere. In any event, Greenspan had no of mind in engaging in competition does not duty to disclose his tentative future alone provide a basis for liability. See employment plans in his letter of Restatement of Unfair Competition § 1, resignation. An employee who plans to work comment c (Tent. Draft No. 1 1988). for a competitor of his employer has no duty to volunteer that fact, either before or after FN7. As to this unlawful conduct, we he submits his resignation. Greenspan's agree with the judge that the letter of August 1, 1984, provides no basis defendants' conduct was a wilful and for the liability of the defendants. knowing violation under G.L. c. 93A, §§ 2 & 11 (1988 ed.). b. The judge found that in 1984 Scherer had d. When Isotronics's engineering manager left in January, 1985, with full disclosure, he took a notebook that he had compiled containing certain information. He left copies behind at Isotronics. There is no evidence that the defendants knew about the notebook. The plaintiffs want the notebook and copies of it returned. The judge ruled that certain information in the notebook was confidential and that Aegis should return the notebook and copies. There is no evidence that Aegis's use of the notebook caused any harm to the plaintiffs or benefited the defendants in any significant way. A judgment directing Aegis to deliver the notebook and any copies to Isotronics should be entered.
4. The case is remanded to the Superior
Court for proceedings consistent with this opinion.
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