When it comes to the law of torts, the doctrine of “preemption” refers to the notion that when two authorities of law come into conflict, the law of the lower authority would be displaced by a higher authority of law. Notably, most common law tort claims brought against former employees are often preempted through state statutes that prohibit trade secret theft in many states, especially in those states where some version of UTSA (Uniform Trade Secrets Act) has been adopted.
To continue our discussion, this blog post is a review of “Breach of Fiduciary Duty Claims,” which is part of the common law tort claims brought under the UTSA and DTSA (Defend Trade Secrets Act).
Breach of Fiduciary Duty Claims under the DTSA and/or UTSA
When it comes to the law of employment, employees are obligated to act in the best interest of their employers and/or the businesses of these employers. This is known as a “fiduciary duty.” Sometimes, particularly when the individual involved is a high-level employee, claims regarding a breach of fiduciary duty and claims for breach of the duty of loyalty (to be discussed in the next blog and Part XIV of this series) are treated synonymously in some courts when dealing with lawsuits related to confidential information or trade secret misappropriation.
In this regard, although both may not be generally used, employers may wish to assert claims for a breach of fiduciary duty and a breach of the duty of loyalty when seeking the protection of their trade secrets. However, it is generally accepted, in most states, that an employer should consider whether the employee is a true fiduciary, such as a company or business’s director or officer who has discretionary authority in that capacity or one who participates in the business’s management, in order to go for a breach of fiduciary duty claim.
When asserting the breach of fiduciary duty claim, the employer should allege that the employee’s action(s) benefitted a competitor or harmed the employer’s business despite holding a fiduciary obligation to act in the employer’s or its business’s best interests. However, the employer should consider the feasibility of asserting a claim for a breach of duty of loyalty if the departing or former employee did not hold a fiduciary obligation, since the breach of duty of loyalty claims are most suited for employees who are not fiduciaries and/or did not hold fiduciary obligations with the business or company.
In Part XIV of this series and our blog post titled “Breach of Duty of Loyalty Claims under the DTSA & UTSA,” we will move the discussion forward by hammering on the “Breach of Duty of Loyalty” and the circumstances under which it could be sought to protect trade secrets and/or confidential information from misappropriation.
As usual, while you should strive to be #UnusuallyMotivated, stay tuned for more education, training, and legal guidance. In the interim, reach out to us with questions and/or comments on our website at the Contact Us page!
Always rising above the bar,
Isaac T.,
Legal Writer, Author, & Publisher.