Flair Communications Agency, Inc. v. David Flaherty, Kathleen Mitchell and Douglas Litwin
Published: Apr. 19, 2001 | Result Date: Feb. 1, 2001 | Filing Date: Jan. 1, 1900 |Case number: C001061SC Verdict – $0
Facts
This lawsuit arose out of a dispute between the Flair Communications Agency, a promotion agency, and David
Flaherty, Kathleen Mitchell and Douglas Litwin, three of its former senior officers and employees. Plaintiff
Flair initiated the lawsuit against defendants Flaherty, Mitchell and Litwin, the three most senior individuals
who worked in and managed FlairÆs San Francisco office. Flair alleged that the defendants voluntarily resigned
from Flair in March 2000 and subsequently started up Seismicom, a competing promotion agency in San
Francisco.
Flair maintained that the defendants subsequently solicited Flair clients, Flair employees and misappropriated
FlairÆs trade secrets, all in violation of their employee agreements not to disclose and solicit. Flair also
contended that the defendants breached their fiduciary duties to Flair by concealing and developing a corporate
opportunity for their own benefit and by soliciting Flair clients and employees while the defendants were still
employed by Flair.
Flair further claimed that the defendants interfered with FlairÆs contractual relations with its clients and
interfered with FlairÆs prospective economic advantage with its clients. FlairÆs complaint against defendants
included causes of action for breach of the employee agreements, breach of fiduciary duty, intentional
interference with contractual relations, intentional and negligent interference with prospective economic
advantage and misappropriation of trade secrets.
The defendants denied FlairÆs allegations and claimed that they were involuntarily terminated in March 2000
which, by the terms of the employee agreements, vitiated the prohibitions on client solicitations, employee
solicitations and use of trade secrets that were contained in the employee agreements.
The defendants further maintained that prior to their involuntary termination by Flair, they were acting in good
faith and in a manner they reasonably believed to be in the best interests of Flair by developing a business
concept for Flair involving online promotions work.
The defendantÆs counterclaim included causes of action for breach of employment contract, breach of implied
contract to pay bonuses, quantum meruit for bonuses, defamation, interference with prospective advantage and
intentional infliction of emotional distress.
Each party sought punitive damages from the other.
At the close of the evidence, Flair dropped its claims for intentional interference with contractual relations and
negligent interference with prospective economic advantage.
The defendants dropped their claim for quantum meruit.
Damages
Plaintiff Flair sought damages for the defendantsÆ alleged solicitation of customers in the amount of $1,133,800, damages for defendantsÆ alleged solicitation of Flair employees in the amount of $199,982, and punitive damages. Defendant Flaherty sought damages from the plaintiff for lost compensation damages ($1,001,008). Defendant Mitchell sought damages from the plaintiff for defamation in the amount of $300,000. Defendant Litwin sought damages from the plaintiff for lost compensation in the amount of $153,441.
Other Information
It was undisputed that on the day of their departure, the defendants were proposing and autonomous "spin-off" corporation to replace the plaintiffÆs existing San Francisco Office. This spin-off would be at least partially owned by the defendants and would concentrate on promotions performed over the internet, which were termed "online" promotions. The plaintiff contended that when the defendantsÆ proposal was turned down at a management meeting, defendants resigned. The defendants maintained, however, that they were terminated for making a proposal that management deemed to be of no value to the corporation. The plaintiffs further claimed that the defendants had not disclosed this corporate opportunity previously to upper management and were secretly planning on capitalizing upon it for their own benefit by starting a separate business that would service the plaintiffÆs existing clientele to the plaintiffÆs detriment. The plaintiff produced five witnesses to support its contentions that defendants Flaherty and Mitchell voluntarily resigned and one witness to support its claim that Litwin voluntarily resigned. The plaintiff also adduced the testimony of three additional eyewitnesses who spoke with Flaherty and Mitchell shortly after the incident, in which by inference or direct statement, Flaherty and Mitchell allegedly confirmed their voluntary resignations. Additionally, the plaintiff produced the testimony of an unbiased former co-worker of defendant Flaherty who testified that prior to the day of termination, Flaherty informed her that he was planning on moving forward with an autonomous spin-off corporation based in San Francisco with or without the approval of the firmÆs upper management. The defendantsÆ attorney contended that the eyewitnesses were lying and that photographs showed that the theft of plaintiffÆs client files did not occur on the date to which plaintiffsÆ witnesses testified.
Deliberation
4.5 hours
Poll
8-0
Length
13 days
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