In Great American Food Chain, Inc. v. Andreottola, a corporate officer and director negotiated and accepted employment with a competitor while still employed with his prior employer. No. 3:14-CV-1727-BK, 2016 U.S. Dist. LEXIS 27658 (N.D. Tex. March 4, 2016).  After the officer terminated his employment, the prior employer sued based on multiple claims.  One claim asserted by the prior employer was that the defendant breached a fiduciary duty as officer and director.  The former employer argued that a fiduciary duty encompasses, at minimum, a duty of good faith and fair dealing, and it requires one to place the interest of the other party before his own as well as a duty not to compete with the principal in matters relating to the subject matter of their transactions. The former employer argued that the defendant was required to provide notice of his intent to terminate his position, and he wrongfully breached his fiduciary duty when he accepted employment with the competitor while still engaged as a president and director.

The court disagreed, holding that the prior employer’s arguments fell short. The court noted that the Supreme Court of Texas had observed that such actions do not constitute breach of fiduciary duty by an employee. Moreover, the court also noted that there was no evidence in the record to suggest that the defendant misappropriated trade secrets, impermissibly solicited its customers, improperly used its funds for personal gain or otherwise attempted to injure his prior employer.

Interesting Note:  This court used Texas Supreme Court authority dealing with fiduciary duties of employees for precedent in a case dealing with an employee who was also an officer and director.  There are arguably higher duties owed by an officer and director to a company than those owed by an average employee.