## Facts

- Scanwell Freight Express STL, Inc. operated a St. Louis freight-forwarding office managed by Stevie Chan.
- Chan was an at-will employee and did not sign a noncompete agreement.
- While still employed, Chan worked with Dimerco Express (U.S.A.) Corp., a direct competitor, on opening a Dimerco office in St. Louis, including preparing a business proposal at Dimerco’s request.
- Chan arranged for Dimerco to take over the lease of Scanwell’s St. Louis premises when the lease expired.
- Chan resigned effective March 1, 2001; about one month later, Dimerco opened its St. Louis office with Chan as general manager.
- Dimerco’s new office operated from the same premises, employed most of the same employees, temporarily used the same telephone number, and obtained a number of Scanwell’s customers.
- Scanwell alleged Chan also provided confidential information and customer profiles and failed to alert Scanwell about the lease expiration while arranging for Dimerco to obtain the lease.

## Issues

1. To what extent does an employee’s duty of loyalty prohibit pre-resignation planning to compete when the employee is at-will and not bound by a noncompete agreement?
2. Whether the verdict-directing jury instructions erroneously allowed liability for “mere planning and preparation” to compete, rather than requiring active competition or other disloyal acts during employment.
3. Whether the judgment for breach of duty of loyalty and conspiracy could stand given the challenged instructions and the properly defined legal standard.

## Decision

- The Supreme Court of Missouri reversed the judgment and remanded.
- The court treated Scanwell’s theory as a claim for breach of the employee duty of loyalty (even though Scanwell labeled it “breach of fiduciary duty”).
- The court held the jury instructions misstated the law by permitting liability based on mere planning and preparation to compete.
- Because the instructions allowed the jury to impose liability for nonactionable conduct, the verdict could not stand.

## Legal Principles

- An employee owes a duty of loyalty to the employer during the employment relationship and may not actively compete with the employer or act directly adverse to the employer’s interests while employed.
- Absent a noncompete agreement or other restriction, an at-will employee may lawfully plan and prepare to compete after resigning.
- “Mere planning and preparation” to compete, without more, is not itself a breach of the duty of loyalty.
- Disloyal conduct may include acts such as misappropriating confidential information or trade secrets, diverting business opportunities, or secretly soliciting the employer’s customers or employees before resignation.
- Jury instructions in duty-of-loyalty cases must distinguish lawful preparatory conduct from actionable disloyal competition or other wrongful acts occurring during employment.

## Conclusion

The Missouri Supreme Court reversed and remanded because the jury was improperly instructed that an employee could breach the duty of loyalty through pre-resignation planning alone; Missouri law permits such planning by an at-will employee unless the employee engages in active competition or other disloyal acts while still employed.


Scanwell Freight Express STL, Inc. v. Chan, 162 S.W.3d 477 (Mo. 2005) (en banc)