Case 19.1 1-Legal Environment. Did Ward breach any duties owed to his employer i

Question

Case 19.1

1-Legal Environment. Did Ward breach any duties owed to his employer in addition to his alleged breach of duty of loyalty? Discuss.

2-What if the facts were different? Suppose that Wards pre-termination activities focused on a product that was not designed to compete with Tasers products. Would these efforts have breached the duty of loyalty? WHY OR WHY NOT?

The Business and Employment Environment The agent's loyalty must be undivided. The agents ty also means that any information ed through the agency relationship actions must be strictly for the benefit of the principal a breach of loyalty to disclose such and must not result in any secret profit for the agent ring the agency relationship or after ical examples of confidential infor mer employee had breached his duty of loyalty by plan In the following case, an employer alleged that a for ical examples of confidential intor-er rets and customer lists compiled by ning a competing business while still working for the employer Spotlight on Taser International Case 19.1 Taser International, Inc. v. Ward Court of Appeals of Arizona, Division, 224 Ariz. 389, 231 P3d 921 (2010) Background and Facts Taser International, Inc., develops and makes electronic control dev commonly called stun guns, as well as accessories for electronic control devices, including a personal video and audio recording device called the TASER CAM Steve Ward was Taser's vice president of marketing when he began to explore the possibility of developing and marketing devices of his own design, including a clip-on camera. Ward talked to patent attorneys and a product development company and completed most of a business plan After he resigned from Taser, he formed Vievu, LLC, to market his clip-on camera Ten months after Ward resigned, Taser announced the AXON, a product that provides an audio- isual perspective of the person involved. Taser then filed a suit in an Arizona state court against Ward, alleging that he had breached his duty of loyalty to Taser. The court granted Taser's motion for a summary judgment in the employer's favor. Ward appealed In the Language of the Court PORTLEY, Judge An agent is under the duty to act with entire good faith and loyalty for the furtherance of the interests of his principal in all matters concerning or affecting the subject of his agency. One aspect of this broad principle is that an employee is precluded from actively competing with his or her employer during the period of employment. Although an employee may not compete prior to termination, the employee may take action during employment, not otherwise wrongful, to prepare for competition following termination of the agency relation- ship. Preparation cannot take the form of acts in direct competition with the employer's business. [Emphasis added.] It is undisputed that, prior to his resignation, Ward did not solicit or recruit any Taser employ ces, distributors, customers, or vendors; he did not buy, sell, or incorporate any business; he did not acquire office space or other general business services; he did not contact or enter into any agreements with suppliers or manufacturers for his proposed clip-on camera; and he did not sell any products. However, Ward did begin developing a business plan, counseled with several attorneys, explored and abandoned the concept of an eyeglass-mounted camera device, and engaged, to some extent, in the exploration and development of a clip-on camera device. Ward argues that his pre-termination activities did not constitute active competition but merely lawful preparation for a future business venture. Taser contends, however, that "this case is ut developing a rival design during employment, knowing full well TASER has sold such a device and continues to develop a second-generation product. Assuming Taser was engaged in the research and development of a recording device during Ward's employment, assuming Ward knew or should have known of those efforts, and assuming Taser's device would compete with Ward's concept, substantial design and development efforts by Ward duing his employment would sonstijute dinectcompesition withothe busiaess activitiesoof öfaser and

Explanation / Answer

1. Apart from the alleged breach of the duty of loyalty, Ward may have taken up a business opportunity that violates the doctrine of corporate opportunity. While being employed with Taser, Ward developed a product that will directly compete with Taser in the market and probably eat some of Taser's market share.

2. In the second scenario, Ward's efforts won't breach his duty of loyalty if:

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