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Bancroft-Whitney Co. v. Glen - 64 Cal. 2d 327, 49 Cal. Rptr. 825, 411 P.2d 921 (1966)

Rule:

Corporate officers and directors are not permitted to use their position of trust and confidence to further their private interests. While technically not trustees, they stand in a fiduciary relation to the corporation and its stockholders. Public policy has established a rule that demands of a corporate officer or director, peremptorily and inexorably, the most scrupulous observance of his duty, not only affirmatively to protect the interests of the corporation committed to his charge, but also to refrain from doing anything that would work injury to the corporation, or to deprive it of profit or advantage which his skill and ability might properly bring to it, or to enable it to make in the reasonable and lawful exercise of its powers. Cal. Corp. Code § 820 provides that an officer must exercise his powers in good faith, with a view to the interests of the corporation.

Facts:

Plaintiffs filed an action for breach of fiduciary duty by corporate officer and unfair competition, arguing that defendants were liable for action with respect to their attempts to persuade plaintiff's employees to change companies. The lower court found in favor of the defendants, holding that defendant corporate officer did not breach fiduciary duties, and defendants were not guilty of unfair competition. Plaintiff appealed.

Issue:

Does an attempt to obtain or solicit staff from plaintiff’s company constitute a breach of fiduciary duties and unfair competition?

Answer:

Yes.

Conclusion:

The court held that evidence showed as matter of law defendant, plaintiff's corporate officer, violated duties to plaintiff by soliciting employees for defendant company, and other defendants were guilty of unfair competition by acting in concert. The undisputed evidence showed a consistent course of conduct designed to obtain plaintiff's employees for the competitor.

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