Issue
In Reeves v. Hanlon, (— Cal. Rptr. 3d —, 2004 WL 1794708, Cal., Aug. 12, 2004), the Supreme Court of California recently addressed the issue of whether a law firm may be held liable for intentional interference with prospective economic advantage for using wrongful conduct to induce at-will employees to quit working for another employer.
Facts
Southern California attorneys, Daniel Hanlon and Colin Greene, were hired to work for the law firm of Robert L. Reeves and Associates. Hanlon and Greene later resigned without warning or notice. Prior to their departure, they accessed password-protected computer files and printed out 2,200 client names, addresses, and phone numbers and erased client documents and other computer files. They also set out to create dissatisfaction among Reeves employees for several months prior to their departure and then solicited key Reeves employees to come and work for them when they resigned. Reeves lost nine employees, including six that went to work for Hanlon and Greene. The employees who left the firm were at-will employees. Reeves also lost 144 clients after Hanlon and Greene resigned. Hanlon and Greene personally contacted Reeves' clients by phone to solicit their business. Hanlon and Greene also left no status reports or pending list of deadlines for the matters they were working on before they resigned.
Reeves brought a lawsuit alleging, among other things, that Hanlon and Greene intentionally interfered with contractual relations and prospective business opportunities and also misappropriated confidential information. After a trial in the matter, the trial court found in favor of Reeves on these claims and awarded damages in his favor. The Court of Appeal affirmed the trial court's decision.
Appellate Court Decision
The California Supreme Court affirmed the decision of the Court of Appeal. The Supreme Court found that a person does not commit an actionable wrong by merely extending a job offer that induces an at-will employee to terminate his or her employment. However, where the person soliciting the at-will employee engages in a wrongful act to induce the employee to terminate his or her employment, liability can be imposed. The Court described a wrongful act as one that is "proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard." The Court found that such interference with an at-will employment relationship should be viewed as an interference with prospective economic advantage because the interference affects the future relations between the former employer and employee.
The Court found that Hanlon and Greene engaged in both unethical and unlawful conduct when they mounted a campaign to disrupt Reeves' business, unlawfully deleted and destroyed computer files, and misappropriated confidential information to solicit clients. The Court upheld the trial court's award of damages finding that Hanlon and Greene purposefully engaged in wrongful acts to cause Reeves' employees to terminate their at-will employment contracts.
The Court also found that Hanlon and Greene violated the Uniform Trade Secrets Act (UTSA). Although the UTSA does not forbid an individual from announcing a change of employment to clients on a protected trade secret list, it does prohibit using such a list to solicit clients. Here, the Court determined that Hanlon and Greene used Reeves' client list to directly solicit clients by phone. Furthermore, the business announcements sent out by Hanlon and Greene led clients to believe that Reeves had died or that his firm had gone out of business.
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