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Before a person invokes refusal to deal as a reason for diverting a corporate opportunity he must unambiguously disclose that refusal to the corporation to which he owes a duty, together with a fair statement of the reasons for that refusal.
From 1976 to 1979, James H. Porter was vice-president and chief scientist of Energy Resources Corporation, Inc. (ERCO). On October 5, 1979, he resigned and organized Energy & Environmental Engineering, Inc. (EEE). The first business EEE undertook was a research project, to be done in collaboration with Howard University, for the United States Department of Energy concerning a method of burning high sulfur coal which would produce little air pollution. ERCO complains that Porter diverted a corporate opportunity, violated his employment agreement with ERCO and misappropriated trade secrets. A Superior Court judge sitting without a jury heard the case and entered judgment for the defendants.
Did Porter violate his employment agreement with ERCO when he diverted the latter’s corporate opportunity?
The court held that before Porter invoked the refusal to deal as a reason to divert ERCO’s opportunity, he should have unambiguously disclosed the refusal to ERCO, together with a fair statement of the reasons for the refusal. The court held that the diversion of ERCO’s opportunity was a breach of the employment agreement to promote the business of Porter.