## Facts

- Duane Jones Company, Inc., a New York advertising agency, had gross billings of about $9 million by 1951; its clients and employees were generally at will and not bound by written contracts.
- In early 1951, the agency lost major accounts and experienced significant internal disruption, including executive departures and concerns about Duane Jones’s conduct.
- In mid-1951, key agency officers and employees became dissatisfied with working conditions and confronted Jones; negotiations over buying him out occurred but no sale was completed.
- Several defendants resigned as officers and directors, stating they would continue working as employees and service assigned accounts; the company’s board then discharged them “immediately and for cause.”
- On August 23, 1951, a new advertising agency, Scheideler, Beck & Werner, Inc., was incorporated and began operations on September 10, 1951.
- Within roughly six weeks, the new agency hired 71 of Duane Jones Co.’s 132 employees, including top officers, and obtained several of Duane Jones Co.’s accounts, including Manhattan Soap Co., Inc.
- Evidence permitted findings that, while still employed by Duane Jones Co., certain defendants solicited co-workers to join the new agency and discussed shifting the Manhattan Soap account to the new agency.
- Duane Jones Co. sued alleging defendants conspired to deprive it of key employees and principal customers; a Manhattan Soap officer, Frank G. Burke, Jr., was alleged to have participated.

## Issues

1. Whether officers and key employees breached duties of loyalty by secretly planning, while still employed, to divert the employer’s clients and workforce to a competing firm.
2. Whether the evidence supported imposing liability on Burke (a client’s officer) and on Hayes for participation in the alleged concerted scheme.
3. Whether the pleadings stated a legally sufficient cause of action against the new corporate entity, Scheideler, Beck & Werner, Inc.
4. Whether the evidence supported causation and the amount of damages awarded against the liable defendants.

## Decision

- The court upheld liability against the individual insider defendants (other than Burke), sustaining the jury’s finding that they engaged in concerted disloyal conduct aimed at diverting the plaintiff’s business and key employees.
- The court agreed that Burke was not liable because the complaint and proof did not establish actionable participation by him in the alleged scheme.
- The court reinstated liability against Hayes, concluding the record contained sufficient evidence to support the jury’s verdict as to his participation.
- The court set aside the judgment against Scheideler, Beck & Werner, Inc., holding the complaint failed to state a valid cause of action against the corporate defendant.
- The court sustained the damages award as against the liable individual defendants, finding sufficient evidentiary support for causation and amount.

## Legal Principles

- Corporate officers and key employees owe duties of loyalty and good faith that bar them, while still employed and in positions of trust, from secretly soliciting the employer’s staff or taking steps to divert the employer’s business to a competing venture.
- The at-will status of clients and employees does not immunize insiders from liability when the loss of accounts and personnel is caused by disloyal conduct undertaken during the employment relationship.
- “Conspiracy” functions as a basis for joint liability when defendants act in concert to accomplish a wrongful objective; liability turns on participation in the actionable underlying misconduct.
- A client or client-side officer may choose to move business and discuss future arrangements without incurring liability absent proof of collusive, wrongful participation in insiders’ breach of duty.
- A corporate defendant’s liability requires a legally sufficient pleaded claim; benefit from individuals’ misconduct does not substitute for proper allegations establishing corporate wrongdoing.

## Conclusion

The court held that insider officers and employees could be liable for coordinating, while still employed, a mass shift of personnel and accounts to a competing agency in breach of loyalty, but a client’s officer was not liable without proof of actionable participation, and the claim against the new corporate entity failed because the pleadings did not adequately state a cause of action against it.


Duane Jones Co. v. Burke, 306 N.Y. 172, 117 N.E.2d 237 (N.Y. 1954)