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Supreme Judicial Court of Massachusetts,Bristol.AUGAT, INC., et al.
FN2.Jeremy D. Scherer.Argued Oct. 1, 1990.Decided Jan. 16, 1991.Before LIACOS, C.J., andWILKINS,ABRAMS, NOLANand O'CONNOR, JJ.
WILKINS, Justice.The plaintiff Isotronics, Inc. (Isotronics), asubsidiary of the plaintiff Augat, Inc.(Augat), manufactures high reliability metalmicrocircuit packages used to houseelectronic circuits. The individual defendant(Scherer) was one of three stockholders whosold Isotronics to Augat in 1975. Hecontinued to work for Isotronics until 1980,served next as an Augat vice president, andthen acted as a consultant to Augat untilApril, 1983. In May, 1984, one month after his agreement not to compete with Isotronicsexpired, Scherer formed the defendantAegis, Inc., intending to manufacture highreliability metal and ceramic microcircuit packages.Scherer then communicated with JayGreenspan, who was vice president andgeneral manager of Isotronics, offering himemployment and an equity interest in Aegis.Greenspan, an able and energetic manager,held a position of trust and confidence inIsotronics and was primarily responsible for Isotronics's success in becoming thedominant force in the metal packagingindustry. Greenspan was not happy atIsotronics. In 1983, he had explored the possibility of forming his own company, buthad been unable to obtain financing. At thattime, Greenspan had discussed his plan withfour Isotronics employees who heldimportant senior managerial positions.Greenspan told Scherer that these senior managers had been interested in Greenspan's1983 plan. In May or June, 1984, Greenspanand Scherer approached these four men, andover the next several months had meetingswith them, separately and collectively, andon occasion also with prospective investorsin Aegis. Three of these four mensubsequently left Isotronics and wentdirectly to work for Aegis. One major ground for the plaintiffs' claims against thedefendants is that, in secretly seeking toobtain the services of key Isotronicsmanagers, they knowingly joined inGreenspan's breach of his duty to Isotronics.That breach, the plaintiffs assert, in time ledto a disruption of Isotronics when all thosemanagers left Isotronics within a period of approximately two months.In the summer of 1984, Scherer devoted hisefforts to obtaining financing for Aegis.Greenspan and three of the managers whohad been on Greenspan's prospective list in1983 were committed to work for Aegis, if Aegis could be funded. The existence of the prospective management team was the mostimportant factor in the view of the venturecapitalists. Scherer prepared a detailed business plan, describing Aegis's purposes;its potential competitors; the size andcondition of the packaging market, includingthe fact that Isotronics controlled about two-thirds of that market; and, without namingthe others, the experience and background of
Aegis's anticipated management team. Theother major ground for the plaintiffs' claimsin this case is that, in breach of his duty tomaintain the confidentiality of Isotronics'sgross sales figures, Greenspan disclosed precise figures to Scherer who was then ableto include in his business plan informationabout the current size of the metal packagingmarket, information that Scherer would nototherwise have had and without which, it isclaimed, venture capitalists would not haveinvested in Aegis.Scherer sent his business plan to potentialinvestors late in July, 1984. Greenspandelivered a letter of resignation on August 1,1984, not stating any specific date for hisdeparture. He made no mention then, or atany other time, of the possible departure of those key managers with whom he andScherer had been talking or of other Isotronics personnel with whom Greenspanhad been talking about joining Aegis. The prospective management team of Aegis metearly in September and agreed on their relative shares of ownership of Aegis stock.Greenspan left Isotronics on September 27.On October 9, Aegis received a commitmentletter for an investment of $4,300,000. Thetransaction was concluded on November 6.Aegis then entered the metal packaging business, not producing its first packagesuntil May, 1985.Augat and Isotronics brought this action inApril, 1985, advancing various claimsagainst the defendants. After extensivediscovery and other pretrial activity and the bifurcation for trial of the liability anddamages portions of the case, the matter wastried in June and July, 1988, before a judgewithout a jury, during twenty-four trial days.In August, 1989, the judge filed his findingsof fact and rulings of law. After a Justice of the Appeals Court, in October, 1989,allowed the defendants to take aninterlocutory appeal, the judge filedamended and supplemental findings of factand rulings of law. We transferred thedefendants' interlocutory appeal here on our own motion.The trial judge ruled in the plaintiffs' favor on only a portion of their theories of liability. He found for the defendants on theclaim that various employees who went toAegis had entered into noncompetitionagreements with Isotronics. He found noappropriation of Isotronics's trade secrets, nosolicitation by Aegis of customers whileGreenspan worked for Isotronics, and nomisappropriation of customer lists.The judge concluded, however, that thedefendants were liable for Greenspan's breach of his duty of loyalty to Isotronics indisclosing confidential information toScherer about Isotronics's level of annualsales. We disagree with this ruling becauseinformation concerning Isotronics's generallevel of sales was not confidential and nospecific information concerning that level of sales was required by prospective venturecapitalists. The judge also ruled thatGreenspan violated his duty of loyalty when,while still an Isotronics employee, hesecretly solicited key managerial employeesto join Aegis once it was funded. We upholdthis ruling. He also ruled that other former Isotronics employees had violated their dutyto Isotronics, a point we reject. Additionally,the judge found liability because of misrepresentations made to Isotronics andAugat and an intent of Greenspan andScherer to cripple Isotronics. We reject thesetheories as independent bases of liability.
1. We reject the plaintiffs' theory of liability based on the fact that, as the judge found,Greenspan, while an employee of Isotronics,disclosed confidential information toScherer concerning the precise level of Isotronics's sales of metal packaging. Theargument is that, armed with Isotronics'ssales figures, Scherer was able to provideinformation to venture capitalists withoutwhich they would not have invested$4,300,000 in Aegis. Scherer did notdisclose precise sales figures to potentialinvestors, but he did state in a business plansent to potential investors, late in July, 1984,that Isotronics's annual sales were between$30,0000,000 and $32,000,000.Potential investors would be interested, of course, in the approximate size of the marketin which they would be investing their funds. We accept the conclusion, inherent inthe judge's findings, that the people whoinvested in Aegis would not have done sowithout that information.Isotronics held about two-thirds of the metal packaging market in 1984, a fact that wasknown to people knowledgeable about theindustry, in part because Isotronics did notkeep that fact confidential. This informationsuggests that the approximate volume of sales in the entire industry was known by people who knew the industry.Although general business information androutine data of a particular companynormally is not protectible as confidential(
193 [1961] ), the gross sales of a corporationmight properly be protectible as confidentialin particular circumstances, although thatinformation would not be a “trade secret” of the traditional kind. See
Mass. at 75, 176 N.E.2d 193.We shallassume that, in particular circumstances, theamount of Isotronics's gross annual sales of metal packages could be protectible,confidential information, and, if so, anemployee would have a duty not to disclosethat information.In determining confidentiality, severalfactors are relevant, including “the extent towhich the information is known outside of the business”; “the extent of measures taken by the employer to guard the secrecy of theinformation”; and “the ease or difficultywith which the information could be properly acquired ... by others.”
840, 282 N.E.2d 921.By these tests, the plaintiffs' claim that the dollar volume of Isotronics's sales was entitled to protectionas confidential information fails.Isotronics did not consistently and diligentlytreat the level of its annual sales as aconfidential corporate fact. Itsacknowledgement and the acknowledgementof people interested in the industry thatIsotronics had about two-thirds of the salesin the industry suggest strongly that the totalannual sales of the industry were known inapproximation by Isotronics and others. If the approximate volume of sales byIsotronics's competitors was generallyknown, as had to be the case for Isotronicsto determine its market share, Isotronics'sdisclosure of its market share in effectdisclosed its approximate annual salesvolume. Moreover, the chairman of the
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