## Facts

- Shell Oil Company employed Paul B. Hunter as a senior geologist (1930–1941) in charge of exploration work along the Gulf Coast region.
- Hunter’s duties required collecting and evaluating geological and geophysical information and advising where Shell should acquire oil and gas interests and drill test wells.
- The information Hunter developed and handled was confidential, and his employment relationship required utmost good faith.
- Shell had a known rule prohibiting employees from acquiring royalty and other mineral interests.
- Shell discovered in 1941 that Hunter had disclosed Shell’s confidential exploration information to third parties (including Joncas, St. Germain, and Southland Royalty Company).
- Using that information, those parties acquired royalty, mineral, and related oil-and-gas interests in Texas, Louisiana, and Arkansas, sometimes through corporations and other devices intended to conceal ownership.
- Hunter received fractional participations in these acquisitions, sometimes in his own name, sometimes under an alias, and sometimes through entities in which he had an interest.
- Shell discharged Hunter and filed consolidated federal actions seeking constructive trusts, conveyance of interests, and accounting, with reimbursement of defendants’ acquisition costs.

## Issues

1. Whether Hunter breached fiduciary duties to Shell by disclosing confidential exploration information and participating in mineral acquisitions contrary to Shell’s policy and interests.
2. Whether equity properly imposed constructive trusts on the royalty, mineral, and leasehold interests acquired through Hunter’s breach, with accounting and conveyance to Shell upon reimbursement of acquisition costs.
3. Whether the equitable relief could extend to interests held by third parties who acted in concert with Hunter and to interests traceable to the misuse of Shell’s confidential information.

## Decision

- The Fifth Circuit affirmed the judgment for Shell.
- The court held that Hunter, as a trusted employee with access to confidential exploration data, owed fiduciary duties of loyalty and good faith that he violated by diverting information and participating in competing acquisitions.
- The court upheld constructive trusts over interests acquired through the breach, including interests held by confederates involved in the scheme.
- The court approved the district court’s remedy requiring accounting and conveyance to Shell, conditioned on Shell’s reimbursement of acquisition costs.
- The court found no reversible error in the trial court’s determinations that the challenged interests were sufficiently connected to, and traceable from, the breach.

## Legal Principles

- An employee placed in a position of trust and entrusted with confidential business information owes fiduciary duties of loyalty and utmost good faith to the employer.
- A fiduciary may not exploit the principal’s confidential information or business opportunities for personal gain or for the benefit of confederates, particularly when the fiduciary knows the employer forbids such self-dealing.
- Equity may impose a constructive trust on property acquired through breach of fiduciary duty, compelling transfer to the injured principal and requiring an accounting.
- Constructive-trust relief may reach property held by third parties who participated in the wrongdoing or acquired the property with notice, and may be applied to interests shown to be traceable to the fiduciary’s breach.
- A court may condition recovery on reimbursement of acquisition costs to prevent an unwarranted windfall while stripping the wrongdoer’s gains.

## Conclusion

The Fifth Circuit affirmed equitable relief requiring that mineral-related interests obtained through a senior geologist’s disloyal use of confidential exploration information be held in constructive trust for his employer and conveyed after accounting, with the employer reimbursing acquisition costs.


Hunter v. Shell Oil Co., 198 F.2d 485 (5th Cir. 1952)