## Facts

- Ace Wire & Burlap, Inc. (“Ace”) was a closely held family business.
- Ace was controlled by two family members: Joseph Hamburger (David’s father) and Jacob “Ted” Hamburger (David’s uncle).
- David Hamburger began working full-time at Ace in 1984 and rose to positions including sales manager and general manager.
- During David’s tenure, Ace’s customer base and sales increased substantially, and David’s responsibilities and standing in the business grew.
- Ted resented David’s increasing authority and tried multiple times to remove David from the business, efforts that were blocked by Joseph.
- Ted communicated that if Joseph died first, David would be terminated, leaving David uncertain about his future at Ace.
- While still employed by Ace, David met with an Ace supplier to discuss forming a competing business.
- In early May 1993, the supplier loaned David $50,000, and David promptly leased space for the new venture.
- On May 13, 1993, David resigned from Ace without giving notice.
- After resigning, David incorporated and operated a competing business, hired Ace’s bookkeeper, and contacted Ace customers; many transferred their business to David’s new company.
- Ted sued David and Joseph, alleging (1) David’s financing and lease arrangements were made during his employment and violated his duty of loyalty, and (2) David obtained and used Ace’s customer list with Joseph’s assistance, also violating duties owed to Ace.
- David and Joseph asserted counterclaims against Ted arising from the broader family and management dispute.

## Issues

1. Whether David breached his duty of loyalty to Ace by arranging financing and leasing space for a competing business while still employed.
2. Whether Ace’s customer information (including any customer list and related sales/pricing information) was protectable as confidential information or a trade secret, and whether David wrongfully used it after resigning.
3. Whether, absent a noncompetition or nonsolicitation agreement, David could lawfully solicit Ace’s customers and hire Ace’s bookkeeper after his resignation.
4. Whether Joseph was liable for aiding David’s alleged misconduct, including any assistance in accessing or using Ace customer information.
5. Whether David and Joseph proved their counterclaims against Ted.

## Decision

- The court entered judgment for David and Joseph on Ted’s claims.
- The court entered judgment for Ted on David and Joseph’s counterclaims.
- The court concluded David’s pre-resignation conduct was limited to permissible preparation to compete and did not constitute disloyal competition while still employed by Ace.
- The court determined Ted did not prove that David misappropriated protectable confidential information or trade secrets in connection with his post-employment customer contacts.
- The court found no sufficient basis to impose liability on Joseph for David’s competitive efforts or for any alleged misuse of Ace information.

## Legal Principles

- Employees (including senior employees) owe a duty of loyalty during employment, but they may take steps to prepare to compete—such as seeking financing and securing a lease—so long as they do not begin competing, divert business, or otherwise harm the employer’s operations before leaving.
- After employment ends, and in the absence of enforceable restrictive covenants, a former employee may compete with the former employer and may solicit the former employer’s customers, subject to limits on wrongful conduct.
- Customer lists and related sales information are not automatically trade secrets; the employer must show the information was genuinely secret, provided a business advantage, and was subject to reasonable steps to keep it confidential.
- A former employee may use general knowledge, memory, and relationships developed through work, but may not take or use protected trade secrets or truly confidential materials.
- A corporate officer or controlling shareholder is not liable merely because a family member competes; liability requires proof of participation in a specific wrongful act (such as misappropriation of protected information or other disloyal conduct).
- Counterclaims must be supported by proof of legally actionable conduct; allegations rooted in internal conflict and management disagreements, without more, do not warrant recovery.

## Conclusion

Hamburger v. Hamburger held that David’s actions in obtaining a loan and leasing space while still employed were permissible preparation to compete, and that his post-resignation competition—including contacting Ace customers and hiring a former coworker—was not actionable where no restrictive covenants applied and the plaintiff failed to prove misappropriation of protected confidential information or trade secrets; the court also declined to impose liability on Joseph and rejected the defendants’ counterclaims.


Hamburger v. Hamburger, 1995 WL 579679, 4 Mass. L. Rptr. 409 (1995)