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Call lawyer if disloyal employee causes losses

by on
in Leaders & Managers,Management Training

High-ranking and well-paid employees occasionally think about jumping ship and starting competing companies. And sometimes they try to poach business as they prepare to launch their own enterprises. An employer may never know until it’s too late that a presumably loyal employee was working against its best interests.

If that happens to you, consult an attorney right away! In many cases, the former employee may be liable for any losses his predatory behavior caused.

Recent case:
Russel Bernard was a hedge fund manager for Oaktree Capital Management in Los Angeles. While he was still working for Oaktree, he used his contacts to identify a commercial building in Connecticut he wanted to buy for himself. He also delayed the launch of a new hedge fund while working on his own business plan. Then he quit, bought the building and started a competing investment fund.

A court ordered Bernard to pay Oaktree $12 million, an amount equal to the income the company said it lost when Bernard delayed the launch of the hedge fund.

Bernard appealed, arguing that in California, employees can’t be liable for their employer’s business losses even if they somehow caused those losses.

The Court of Appeal of California refused to reverse the award. It reasoned that this wasn’t a situation in which an incompetent or poor employee somehow lost his employer money—it was a case of deliberate manipulation for the employee’s personal gain. Bernard started his own company and cost Oaktree millions of dollars by breaching his fiduciary duty. Under such circumstances, the court said, employees can be liable for the damage they cause even if those damages were lost profits. (Oaktree Capital Management v. Bernard, No. B207865, Court of Appeal of California, 2nd Appellate District, 2010)

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