## Facts

- Isotronics, Inc., a subsidiary of Augat, Inc., manufactured high-reliability metal microcircuit packages.
- Jeremy (or Jerome) Scherer, a former owner-employee of Isotronics and later an Augat executive/consultant, formed Aegis, Inc. shortly after his noncompetition agreement expired, intending to compete in the same market.
- Jay Greenspan served as Isotronics’s vice president and general manager, held a position of trust, and was central to Isotronics’s market success.
- While still employed by Isotronics, Greenspan communicated and met with Scherer and others about forming and staffing Aegis, including discussions with prospective investors.
- Greenspan and Scherer approached four senior Isotronics managers; three left Isotronics and went directly to work for Aegis within a short period, disrupting Isotronics’s operations.
- Plaintiffs alleged that defendants knowingly participated in Greenspan’s breach of loyalty by orchestrating the departure of key managers and by using company information (including sales figures) to support Aegis’s financing and plans.
- After a bench trial, the trial judge found liability in part for disloyal solicitation but rejected broader claims such as trade-secret misappropriation and misrepresentation; interlocutory review was taken and the Supreme Judicial Court reviewed the rulings.

## Issues

1. Whether a high-level, at-will employee breaches the duty of loyalty by secretly recruiting key coworkers to join a competing venture while still employed.
2. Whether a third party forming a competing business is liable for knowingly participating in the employee’s breach of loyalty.
3. Whether disclosure of the employer’s sales figures and related business data supports liability as misuse of confidential information or trade secrets.
4. Whether additional liability exists for misrepresentation or a claimed scheme to “cripple” the employer beyond traditional loyalty and confidentiality doctrines.

## Decision

- The court upheld liability based on Greenspan’s breach of the duty of loyalty through improper solicitation of key Isotronics managers while he remained in a trusted leadership role.
- The court held Scherer and Aegis could be liable for knowingly joining in and assisting Greenspan’s breach.
- The court rejected liability premised on disclosure of sales figures, concluding the information was not sufficiently confidential to warrant protection on the record presented.
- The court declined to impose liability on broader theories such as misrepresentation or a generalized “intent to cripple” the business where the actionable wrongdoing was adequately addressed by the duty-of-loyalty analysis.

## Legal Principles

- A managerial employee may plan to compete after leaving employment, but may not, while still employed and entrusted with significant responsibility, secretly solicit or organize the coordinated departure of key personnel in a manner that foreseeably harms the employer.
- A third party may be jointly liable when it knowingly participates in, or substantially assists, an employee’s breach of fiduciary duty or duty of loyalty.
- Business information is not protected as confidential or as a trade secret merely because it is commercially useful; protection depends on whether it is not generally known or readily ascertainable and whether the employer actually treated it as confidential.
- Absent affirmative misstatements or a distinct duty to disclose, an employee’s nondisclosure of future competitive plans does not itself establish misrepresentation; courts will not create free-standing tort liability for competitive harm where established doctrines supply the governing limits.

## Conclusion

The court allowed recovery for a senior manager’s disloyal, covert recruitment of key coworkers for a competing enterprise and for a competitor’s knowing participation in that breach, but refused to extend liability based on sales data that was not shown to be genuinely confidential or on broader allegations untethered to recognized loyalty or secrecy protections.


Augat, Inc. v. Aegis, Inc., 409 Mass. 165, 565 N.E.2d 415 (Mass. 1991)