Court Opinion

ID: 1004846
Source: CourtListenerOpinion
Date Created: 2013-07-04 18:47:25.448162+00
Date Added: 2024-06-11T09:08:15.662234
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS
               FOR THE FOURTH CIRCUIT

CRAWFORD & COMPANY,                  
              Plaintiff-Appellant,
                v.
M. HAYES & ASSOCIATES, L.L.C.;
MELINDA L. HAYES,
             Defendants-Appellees,            No. 00-2574

               and
HARVEY A. BRONSTEIN; RITA F.
CLINTON; NINA A. MECKEL,
                      Defendants.
                                     
           Appeal from the United States District Court
            for the District of Maryland, at Baltimore.
             J. Frederick Motz, Chief District Judge.
                         (CA-99-321-JFM)

                      Argued: June 4, 2001
                     Decided: July 10, 2001

   Before WILKINSON, Chief Judge, KING, Circuit Judge, and
         Robert R. BEEZER, Senior Circuit Judge of the
       United States Court of Appeals for the Ninth Circuit,
                      sitting by designation.

Affirmed by unpublished per curiam opinion.

                           COUNSEL

ARGUED: Ralph Bennett Levy, KING & SPALDING, Atlanta,
Georgia, for Appellant. Jeffrey Louis Forman, KAUFFMAN & FOR-
2            CRAWFORD & CO. v. M. HAYES & ASSOCIATES
MAN, P.A., Towson, Maryland, for Appellees. ON BRIEF: Craig M.
Wolff, KING & SPALDING, Washington, D.C., for Appellant. Bruce
E. Kauffman, KAUFFMAN & FORMAN, P.A., Towson, Maryland,
for Appellees.

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

                             OPINION

PER CURIAM:

   Crawford & Company ("Crawford") timely appeals the district
court’s judgment, following a bench trial, in favor of M. Hayes &
Associates, L.L.C., on its breach of loyalty claim. We have jurisdic-
tion pursuant to 28 U.S.C. § 1291, and we affirm.

   Melinda Hayes was employed by Crawford, a national provider of
risk and claims management services, as a branch manager in Craw-
ford’s Baltimore office. In July 1998, while still employed with the
company, she told subordinate mid-level managers at Crawford, as
well as the branch’s marketing representative, that she was consider-
ing leaving the company to establish a competing business. She
brought a team of six supervisors (Crawford mid-level managers)
together to assist her in forming the new company, "M. Hayes &
Associates, L.L.C." The new company commenced operations the
first business day after the effective date of Hayes’ resignation.

   Crawford subsequently filed a complaint, alleging, inter alia, that
Hayes breached her fiduciary duty of loyalty to Crawford by compet-
ing with Crawford for key employees. After a two-day bench trial, the
district court issued an oral opinion in favor of Hayes. The court held
that Hayes did not breach any fiduciary duty of loyalty by recruiting
the mid-level managers that formed her team of supervisors.

   Crawford timely appeals this judgment. Crawford contends that the
district court erred in holding that Hayes did not breach her fiduciary
             CRAWFORD & CO. v. M. HAYES & ASSOCIATES                 3
duty of loyalty to Crawford when she actively recruited subordinate
managers to form a competing company. Crawford does not challenge
the court’s factual findings.

   While still a Crawford employee, Hayes had a fiduciary duty of
loyalty to Crawford that required her to "refrain from actively and
directly competing with [Crawford] for . . . employees, and . . . con-
tinue to exert h[er] best efforts on behalf of h[er] employer." Mary-
land Metals v. Metzner, 382 A.2d 564, 568 (Md. 1978). Hayes could,
however, "prepare or make arrangements to compete with [Crawford]
prior to leaving the employ of [her] prospective rival[ ]" without
breaching such duty. Id. at 569.

   Hayes’ preparation would rise to the level of a breach of fiduciary
duty if she "committed some fraudulent, unfair or wrongful act in the
course of preparing to compete in the future." Id. Such a breach
would occur, for example, if she conspired "to bring about mass resig-
nation of [Crawford’s] key employees." Id. (citing Duane Jones Co.
v. Burke, 117 N.E.2d 237, 245 (N.Y. 1954) (finding breach where
subordinate employees and customers were recruited prior to resigna-
tion)). If Hayes did no more than unite a group of employees contem-
plating future competition with Crawford, however, no such breach
occurred. See id.; Restatement (Second) of Agency § 393 cmt. e ("[I]t
is normally permissible for employees of a firm, or for some of its
partners, to agree among themselves, while still employed, that they
will engage in competition with the firm at the end of the period spec-
ified in their employment contracts."), cited in Maryland Metals, 382
A.2d at 569 n.3.

   Although Hayes was obligated to be candid with Crawford "in pre-
paring to establish a competing enterprise," liability for breach of
fiduciary duty is not predicated upon her failure to make full disclo-
sure, but rather "upon ‘some particular circumstance which rendered
the nondisclosure harmful to [Crawford] or upon [Hayes’] wrongful
conduct apart from the omission.’" Maryland Metals, 382 A.2d at 570
n.4 (quoting Bancroft-Whitney Co. v. Glen, 411 P.2d 921, 935-36 (Ca.
1966)). Indeed, Hayes was only bound "to reveal the precise nature
of h[er] plans to [Crawford if s]he acted inimically to [Crawford’s]
interest beyond the mere failure to disclose." Id. at 573.
4             CRAWFORD & CO. v. M. HAYES & ASSOCIATES
   The district court correctly concluded that Hayes did not breach
any fiduciary duty by recruiting the mid-level managers who formed
her team of supervisors. It based this conclusion on the fact that
Hayes worked as a team with the other departing managers in forming
the competing business; Crawford was aware of the possibility that
Hayes might resign and form such a business; Hayes did not take any
corporate opportunities for herself; and she continued to perform her
job as Crawford’s branch manager in a satisfactory manner up until
the day she resigned. Hayes did not engage in any "unfair, fraudulent
or wrongful conduct . . . which impacted on the economic interest of
[Crawford] in some detrimental fashion," sufficient to constitute a
breach of fiduciary duty; nor did Hayes act "inimically to [Craw-
ford’s] interest." Id. at 571, 573.

    We affirm the judgment of the district court.

                                                        AFFIRMED