Opinion ID: 1140801
Heading Depth: 1
Heading Rank: 7

Heading: Breach-of-Fiduciary-Duty Claim Against Brooks

Text: Williams testified that after his August 2001 confrontation with Brooks about his job interview with Sterling, Williams learned that the interview had wrecked the possibility of any further talks about acquisition. Mark testified that Brooks had betrayed Group 8760 by interviewing for a job with Sterling, pursuing only his own best interests, or [w]hat was best for Dick. It is an agent's duty to act, in all circumstances, with due regard for the interests of his principal and to act with the utmost good faith and loyalty. Williams v. Williams, 497 So.2d 481 (Ala.1986). Implicit in this duty is an obligation not to subvert the principal's business by luring away customers or employees of the principal, or to otherwise act in any manner adverse to the principal's interest. See Naviera Despina, Inc. v. Cooper Shipping Co., 676 F.Supp. 1134 (S.D.Ala.1987). Allied Supply Co. v. Brown, 585 So.2d 33, 37 (Ala.1991). In paragraph 6 of his employment agreement with Group 8760, Brooks committed that he would not directly or indirectly, engage or participate in any activities at anytime during the term of this Employment Agreement in conflict with the best interests of [Group 8760]. The jury was entitled to conclude from the evidence presented, drawing reasonable inferences adverse to Brooks, that he had surreptitiously interviewed with Sterling for a job, knowing that any interest it might have in acquiring Group 8760 would thereby be undercut, thus representing bad faith on his part in not acting in the best interests of Group 8760. Williams's testimony established that Brooks's actions in that regard had sabotaged further talks with Sterling about the possibility of its acquiring Group 8760. The totality of this evidence was substantial evidence indicating that Brooks had breached a fiduciary duty he owed Group 8760 and that it was damaged as a result. Moreover, the only argument Brooks offered in support of his motion for a judgment as a matter of law after Group 8760 rested with respect to this claim was that because Group 8760 was an Alabama limited liability company, it was governed by the Alabama LLC Act and by its own operating agreement and [t]he duties incumbent on the people involved in the LLC flow if anywhere from those two sources. Brooks went on to argue that the Alabama Limited Liability Company Act governs the duties of only members and managers of the limited liability company, and that because Brooks was neither a member nor a manager of Group 8760, there was no fiduciary duty imposed on Brooks under the Act. Consequently, Brooks contended, because the only fiduciary duty alleged in the complaint to have been breached by Brooks was that owing by him as an employee, [t]here is no source of a duty. If there is no source of a duty, there can be no breach of that duty. Id. This argument, repeated on appeal, was not well taken because, as noted, under the principles stated in Allied Supply Co., supra, a duty to act in good faith flows from an agent to his principal and, in this particular case, a duty also flowed from Brooks to Group 8760 under his employment agreement not to act in conflict with the best interests of Group 8760. When Brooks renewed his motion for a judgment as a matter of law at the close of all the evidence, he simply relied on the same grounds he had previously asserted as to this issue, except to state in passing, there is no duty  fiduciary duty on Mr. Brooks in the situation as an employee. Therefore, Brooks's only ground for his motion for a judgment as a matter of law as to the breach-of-fiduciary-duty claim was that he owed, as an employee, no fiduciary duty, and, that ground not being well taken under particular facts of this case, the trial court did not err in denying that motion. The trial judge charged the jury as follows concerning the breach-of-fiduciary-duty claim: The term `fiduciary duty,' refers to the nature of the legal obligation which a corporate officer or employee owes to his employer. The fiduciary duties imposed upon an agent is a duty to act in all circumstances with due regard for the interest of his employer, in this case, Group 8760, and to act in good faith, loyalty, and fair dealing towards his employer. One under a fiduciary duty cannot place himself in a position that is antagonistic to his employer and must not utilize his position to favor himself or some third party in whom he might be materially interested to the detriment of his employer. As long as he is acting as an agent or employee, the relationship exists. A fiduciary duty can be modified by an expressed agreement between the employer and the employee. You must determine whether Mr. Brooks' conduct at Group 8760 demonstrated a breach of his fiduciary duties to Group 8760 [and] if you find that Mr. Brooks, through his dealing with Sterling Commerce, failed to uphold any fiduciary duty upon him, then you should find for Group 8760 on his claim of breach of fiduciary duty. Brooks's only objection to that portion of the charge was that he took exception to that portion of the charge that characterized Dick Brooks as a corporate officer under the breach of fiduciary duty claim. That claim is against him as an employee of an L.L.C. He is not a corporate officer. This comment did not preserve the error Brooks now contends occurred, and the charge became the law of the case, binding on the jury. Alabama Dep't of Transp. v. Land Energy, Ltd., 886 So.2d 787, 795 (Ala.2004). There was no evidence provided, however, from which the jury could quantify the resulting damages in monetary terms or intelligently estimate what percentage or proportion of Dauphin's $9 million lump sum damages figure might justifiably be attributed to Brooks's breach of his fiduciary duty. The compensatory damages the jury assessed for that breach were in the relatively precise amount of $252,500. No testimony or other evidence in the record suggests that amount, or anything in that range, as resulting from Brooks's breach of his fiduciary duty. Coincidentally or not, however, the jury did hear evidence that during the negotiations looking toward Brooks's possible resignation, he refused to waive the right he otherwise had under Group 8760's operating agreement to receive $252,500 as a priority distribution out of any proceeds resulting from a sale of Group 8760, even though all of the other Group 8760 partners were willing to forgo that right to promote a sale of the company. There is no conceivable connection under the evidence between Brooks's unwillingness to relinquish that contractually specified amount and the alleged breach of his fiduciary duty. There being no evidentiary basis for the compensatory damages awarded for Brooks's breach of his fiduciary duty to Group 8760, his motion for a new trial making that point was due to be granted, and its denial constituted reversible error. Because the compensatory-damages award has been eliminated, the punitive damages awarded on this claim must also be vacated. Mobile Infirmary Med. Ctr. v. Hodgen, 884 So.2d 801 (Ala.2003); and Life Ins. Co. of Georgia v. Smith, 719 So.2d 797 (Ala.1998). Consequently, we reverse the judgment as to the claim against Brooks alleging breach of fiduciary duty and remand the case for the entry of an order granting a new trial as to that claim.