Defendants, executives of Ideal, set up a competing business in violation of the fiduciary duty the defendants owed the plaintiff.
The court states that the defendants could plan and prepare to compete, consult an attorney, incorporate, cannot solicit (but can inform customers of plan to leave), cannot approach lower level employees, but could not violate any fiduciary duty. Traditional expectation damages approach failed in this case because the replacement employees were already on the payroll. As a result, restitution/unjust enrichment applies. The court says to look to the value of the benefit conferred or lost. Ideal received:
• Unearned compensation paid to defendants: compensation and punishment for defendants. Defendants must prove what was earned, but since virtually impossible, no earned portion.
• Repayment of compensation paid to lower level employees by defendants.
• Costs of training employees to do the new jobs.
• No lost profits because too speculative.
The fact that the defendants were at will employees is insignificant because costs were not incurred simply because the defendants left. Costs were the result of disruption of Ideal’s business.
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