Delaware’s Court of Chancery is renowned as the country’s premier venue for business litigation. Law students across the nation are, at this very moment, reading a seminal case in a corporate-law textbook written by the Court of Chancery.
For the uninitiated, there are two critical things to know about the Delaware Court of Chancery. (For a real lesson on the Chancery Court, check out the blog, Delaware Litigation, written by Francis Pileggi and Kevin Brady. Francis tipped me off to the case I’m discussing today.) First, it is a court of equity. At the most basic level, this means that the rulings of the Chancellor and Vice-Chancellors are based on principles of fairness. In other words, they have far-ranging power to award relief. Second, the Court is known for issuing opinions with a literary flare of sorts.
In a 79-page decision issued yesterday, the Court lived up to all of these laudable traits. And the case is, at its roots, an employment-law case, to boot. The decision addresses breach-of-contract claims brought by an employee against his former employer and the employer’s counter-claims based on the same contract. The Facts section of the decision starts with this:
Just as its lovely harbors are crowded with their expensive, less than fully utilized vessels, so are southern Connecticut’s towns filled with wealthy money managers. This case is about the falling out between two of them.
The falling out in question arose when the employer, an investment manager, discovered that, over the course of about a month, the employee had emailed himself many of the employer’s documents, which he planned to use once he started a new (and competing) venture. The Court found the employee liable for this conduct but what really caught my eye were the words of warning contained in a footnote:
A word of caution here. I recognize that the principle set forth above is not one that most of us can claim that we have adhered to with fidelity 100% of the time in our working lives. Section 8.05 of the Restatement (Third) of Agency should not be read in a nonsensical, Stalinistway that allows employers an easy excuse to sue or penalize faithful employees for human behavior that does not diminish the effectiveness of the employer in any way. Phones get used for personal phone calls, work copiers get used to make a few copies of necessary personal documents, computers get used to plan vacations, etc., because employees have lives and families. But so too do employees’ own computers, paper, and resources get used for work benefiting their employers.
Fascinating, right?! Of course, the Chancellor is right. What knowledge worker today doesn’t use his personal electronic equipment for the benefit of his employer? In fact, I am writing this post from my “personal” iPad, which is to the benefit of my firm.
I think, at its essence, the Court’s message is this: Employers should not be encouraged or rewarded for suing their employees for de minimis detours along the path of loyal employment. Readers may recall from a prior post that an employer who brought suit against an employee for the employee’s use of Facebook during working time did not fare well.
Seibold v. Camulos Partners LP, C.A. 5176-CS (Del. Ct. Ch. Sept. 17, 2012).
See also Delaware Noncompete Law Blog for more on the Delaware Court of Chancery’s rulings that impact employment law.