## Facts

- Rehabilitation Specialists, Inc. (RSI) provided therapy services to health care facilities and relied on long-term care chains as major customers.
- Nancy J. Koering worked for RSI from 1982, rising to administrator; her duties included soliciting business and negotiating contracts.
- Beverly Enterprises, a large nursing-home operator, was a major RSI customer; Beverly’s operations vice president dealt primarily with Koering on RSI’s behalf.
- While still employed, Koering began considering starting her own therapy company.
- On June 13, 1985, Koering met with Beverly’s vice president and discussed her possible new business; the parties disputed whether her conduct amounted to permissible planning or impermissible solicitation.
- After the meeting, Beverly informed Koering that if she started her business, Beverly would offer her therapy contracts at two facilities (Bloomington and Lake Ridge).
- RSI alleged that Koering, before leaving RSI, used her position, customer relationships, and confidential business information to set up a competing enterprise and divert Beverly-related opportunities to herself.

## Issues

1. Whether disputed evidence about Koering’s pre-departure communications and conduct created a triable question that she breached her duty of loyalty and engaged in unfair competition, making summary judgment improper.
2. Whether RSI produced sufficient evidence to create a triable question that Koering misappropriated confidential business information.

## Decision

- The Minnesota Court of Appeals reversed the grant of summary judgment for Koering and remanded for trial.
- The court held that genuine issues of material fact existed on RSI’s claims for breach of the duty of loyalty, unfair competition, and misappropriation of confidential information.
- The court concluded that the line between permissible preparation to compete and prohibited solicitation while still employed depended on contested facts and competing inferences.

## Legal Principles

- An employee’s duty of loyalty bars soliciting the employer’s customers for the employee’s own benefit or otherwise competing with the employer while still employed.
- An employee may, while still employed, prepare to compete after leaving; the boundary between “preparation” and “solicitation” is not fixed and is a matter of degree.
- Whether the duty of loyalty was breached is generally a question of fact requiring examination of the surrounding circumstances, including role, timing, conduct, and effects on the employer’s customer relationships.
- “Unfair competition” functions as a general category protecting commercial interests and may include conduct such as customer diversion through disloyalty or misuse of confidential information.
- Summary judgment is improper when material facts, reasonable inferences, or credibility assessments are disputed.
- A claim for misuse of confidential business information may proceed when the record permits a reasonable inference that the employee used or disclosed such information for a competing venture.

## Conclusion

Because the evidence could support differing findings on whether Koering’s conduct was permissible preparation or wrongful solicitation and misuse of confidential information while still employed, the appellate court held that the claims required a trial and reversed the summary judgment.


Rehabilitation Specialists, Inc. v. Koering, 404 N.W.2d 301 (Minn. Ct. App. 1987)