Business Litigation & Fraud

Intentional Interference with Business Relationship

Under Alabama law a person can be liable for interfering with the business relationship of another individual or entity.  The elements of tortious interference with a business relationship are:

  1. the existence of a contract or business relationship;
  2. the defendant’s knowledge of the contract or business relationship;
  3. intentional interference with the contract or business relationship by the defendant;
  4. damage to the plaintiff as a result of the interference; and
  5. the defendant must be a stranger to the relationship or contract with which he or she allegedly interfered.

Non-Compete Agreements

Non-competition agreements (or restrictive covenants) have become increasingly popular in discouraging former employees from starting a competing venture and utilizing or disclosing proprietary and confidential information once the employment relationship ends. A non-compete provision is an agreement between an employee and his or her employer whereby the employee contracts not to compete with the employer following termination of the employment relationship. These agreements generally prevent the employee from engaging in the same business/profession, soliciting the company’s customers and revealing the company’s confidential information for the benefit of the former employee or the benefit of a new employer.

Although noncompetition agreements are not favored, see Ala. Code 1975, § 8-1-1(a), an “employee may agree with his employer to refrain from carrying on or engaging in a similar business and from soliciting old customers of such employer within a specified county, city, or part thereof so long as the. employer carries on a like business therein.” Ala. Code 1975, § 8-1-1(b). Our courts, in interpreting that statute, have developed a test to determine whether a given noncompetition agreement is enforceable. A court will enforce a noncompetition agreement only if:

  1. the employer has a protectable interest;
  2. the restriction is reasonably related to that interest;
  3. the restriction is reasonable in time and place;
  4. the restriction imposes no undue hardship.”

DeVoe v. Cheatham, 413 So. 2d 1141, 1142 (Ala. 1982). “The burden is upon the person or entity seeking to enforce a contract which restrains a lawful trade or business to show that it is not void under § 8-1-1.” Calhoun v. Brendle, Inc., 502 So. 2d 689, 693 (Ala. 1986).

Breach of Fiduciary Duty

A fiduciary duty is a legal or ethical relationship of confidence or trust between two or more parties, most commonly a fiduciary or trustee and a principal or beneficiary. One party, for example a corporate trust company or the trust department of a bank, holds a fiduciary relation or acts in a fiduciary capacity to another, such as one whose funds are entrusted to it for investment. In a fiduciary relation one person justifiably reposes confidence, good faith, reliance and trust in another whose aid, advice or protection is sought in some matter. In such a relation good conscience requires one to act at all times for the sole benefit and interests of another, with loyalty to those interests.

“ A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”

A fiduciary duty is the highest standard of care at either equity or law. A fiduciary is expected to be extremely loyal to the person to whom he owes the duty (the “principal”): he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents. The word itself comes originally from the Latin fides, meaning faith, and fiducia, trust.

When a fiduciary duty is imposed, equity requires a stricter standard of behavior than the comparable tortious duty of care at common law. It is said the fiduciary has a duty not to be in a situation where personal interests and fiduciary duty conflict, a duty not to be in a situation where his fiduciary duty conflicts with another fiduciary duty, and a duty not to profit from his fiduciary position without express knowledge and consent. A fiduciary cannot have a conflict of interest. It has been said that fiduciaries must conduct themselves “at a level higher than that trodden by the crowd” and that “[t]he distinguishing or overriding duty of a fiduciary is the obligation of undivided loyalty.”

Corporate directors, may be held to a fiduciary duty similar in some respects to that of a trustee. This happens when, for example, the directors of a bank are trustees for the depositors, the directors of a corporation are trustees for the stockholders or a guardian is trustee of his ward’s property.

Relationships which routinely attract by law a fiduciary duty between certain classes of persons include these:

  • Trustee/beneficiary
  • Conservators and legal guardians / wards
  • Agents, brokers and factors / principals
  • Buyer agent (real estate broker) / buyer client
  • Confidential advisor including financial adviser and investment advisor / advisee or client
  • Lawyer/client
  • Executors and administrators / legatees and heirs
  • Corporate partners, joint adventurers, directors and officers / company and stockholders
  • Board of directors / company
  • Partner/partner
  • Majority/minority stockholders
  • Stockbroker/client
  • Senior employee / company
  • Retirement plan administrators (including 401(k) plans) / retirees and workers
  • Promoters / stock subscribers
  • Liquidator/company
  • Mutual savings banks and investment corporations / their depositors and investors
  • Receivers, trustees in bankruptcy and assignees in insolvency / creditors
  • Doctor/patient
  • Parent/child
  • Teacher/student
  • Priest / parishioner seeking counseling

If you believe that someone has breached their fiduciary duty owed to you contact me now for more information.